March 31, 2020 (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Square Philadelphia (Zip Code) Non-Accelerated FilerxQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 September 30, 2016oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware20-0953973Delaware 20-0953973 (State or other jurisdiction of 2005 Market Street, 17th Floor Philadelphia, PA19103PA 19103 (Address of principal executive offices) (215) (215) 309-7700Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 HIL New York Stock Exchange (NYSE) xý No o a check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405(Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xý No oor a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer”, “accelerated filer”filer," "accelerated filer," "smaller reporting company," and “smaller reporting company”"emerging growth company" in Rule 12b-2 of the Exchange Act.ActLarge Accelerated Filer o☐ Accelerated Filer x☒ o☐ Smaller Reporting Company o☒ Emerging Growth Company ☐ o☐ No xý51,767,11455,984,012 shares of the Registrant’s Common Stock outstanding at November 1, 2016.April 24, 2020.
The Company’sperformance, are forward-looking statements.
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· Difficulties we may incur in implementing our acquisition strategy;
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· Unexpected adjustments and cancellations related to our backlog.
personnel.
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· Special riskseffect of ourthe COVID-19 pandemic on the Company, including its employees and related costs;
· Special risks
· Special risks of
We assume
Tablestatement. In accordance with the Reform Act, Part II, Item 1A of Contents
HILL INTERNATIONAL, INC. AND SUBDISIARIES
Indexthis Report entitled “Risk Factors” contains cautionary statements that accompany those forward-looking statements. You should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-Q,
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PART I — FINANCIAL INFORMATION
September 30, 2016 December 31, 2015 (unaudited) Assets Cash and cash equivalents $ 21,219 $ 24,089 Cash - restricted 3,710 4,435 Accounts receivable, less allowance for doubtful accounts of $72,262 and $63,748 229,892 243,417 Accounts receivable - affiliate 10,870 5,205 Prepaid expenses and other current assets 11,507 10,299 Income taxes receivable 5,035 4,146 Total current assets 282,233 291,591 Property and equipment, net 22,307 23,751 Cash - restricted, net of current portion 1,175 259 Retainage receivable 17,221 2,638 Acquired intangibles, net 11,560 14,659 Goodwill 75,899 74,893 Investments 4,738 8,386 Deferred income tax assets 19,274 19,724 Other assets 5,136 6,662 Total assets $ 439,543 $ 442,563 Liabilities and Stockholders’ Equity Current maturities of notes payable $ 7,316 $ 4,357 Accounts payable and accrued expenses 105,825 112,457 Income taxes payable 5,287 9,064 Deferred revenue 8,697 11,310 Other current liabilities 9,665 5,860 Total current liabilities 136,790 143,048 Notes payable, net of current maturities 146,639 140,626 Retainage payable 870 1,929 Deferred income taxes 16,472 16,341 Deferred revenue 15,254 11,919 Other liabilities 11,084 10,661 Total liabilities 327,109 324,524 Commitments and contingencies Stockholders’ equity: Preferred stock, $.0001 par value; 1,000 shares authorized, none issued — — Common stock, $.0001 par value; 100,000 shares authorized, 58,726 shares and 58,335 shares issued at September 30, 2016 and December 31, 2015, respectively 6 6 Additional paid-in capital 189,049 188,869 Retained earnings (deficit) (2,721 ) 1,205 Accumulated other comprehensive loss (46,662 ) (46,866 ) 139,672 143,214 Less treasury stock of 6,959 shares and 6,743 shares at September 30, 2016 and December 31, 2015, at cost (29,974 ) (29,245 ) Hill International, Inc. share of equity 109,698 113,969 Noncontrolling interests 2,736 4,070 Total equity 112,434 118,039 Total liabilities and stockholders’ equity $ 439,543 $ 442,563 thousands) Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Consulting fee revenue $ 147,993 $ 158,579 $ 457,912 $ 469,458 Reimbursable expenses 19,960 20,356 61,851 61,393 Total revenue 167,953 178,935 519,763 530,851 Cost of services 81,241 89,345 265,052 268,174 Reimbursable expenses 19,960 20,356 61,851 61,393 Total direct expenses 101,201 109,701 326,903 329,567 Gross profit 66,752 69,234 192,860 201,284 Selling, general and administrative expenses 67,247 57,527 179,614 173,101 Share of loss of equity method affiliates 12 14 28 231 Operating profit (507 ) 11,693 13,218 27,952 Interest expense and related financing fees, net 3,368 4,147 10,103 11,252 (Loss) earnings before income tax expense (3,875 ) 7,546 3,115 16,700 Income tax expense 2,880 4,210 6,939 7,980 Net (loss) earnings (6,755 ) 3,336 (3,824 ) 8,720 Less: net earnings — noncontrolling interests 111 388 102 675 Net (loss) earnings attributable to Hill International $ (6,866 ) $ 2,948 $ (3,926 ) $ 8,045 Basic (loss) earnings per common share - Hill International, Inc. $ (0.13 ) $ 0.06 $ (0.08 ) $ 0.16 Basic weighted average common shares outstanding 51,753 51,119 51,704 50,661 Diluted (loss) earnings per common share - Hill International, Inc. $ (0.13 ) $ 0.06 $ (0.08 ) $ 0.16 Diluted weighted average common shares outstanding 51,753 51,803 51,704 51,274 Three Months Ended Nine Months Ended 2016 2015 2016 2015 Net (loss) earnings $ (6,755 ) $ 3,336 $ (3,824 ) $ 8,720 Foreign currency translation adjustment, net of tax (1,638 ) (8,630 ) (1,257 ) (15,910 ) Other, net 79 (78 ) 135 (213 ) Comprehensive loss (8,314 ) (5,372 ) (4,946 ) (7,403 ) Comprehensive earnings (loss) attributable to noncontrolling interests 132 (2,992 ) (1,223 ) (6,728 ) Comprehensive loss attributable to Hill International, Inc. $ (8,446 ) $ (2,380 ) $ (3,723 ) $ (675 ) Nine Months Ended September 30, 2016 2015 Cash flows from operating activities: Net (loss) earnings $ (3,824 ) $ 8,720 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 7,705 8,286 Provision for bad debts 11,879 2,540 Amortization of deferred loan fees 1,334 1,333 Deferred tax expense (benefit) 663 (1,585 ) Share based compensation 1,838 2,360 Changes in operating assets and liabilities, net: Restricted cash (69 ) 10,658 Accounts receivable 2,652 (57,690 ) Accounts receivable - affiliate (5,665 ) (2,830 ) Prepaid expenses and other current assets (1,001 ) (4,556 ) Income taxes receivable (756 ) 25 Retainage receivable (14,583 ) 150 Other assets 5,191 1,009 Accounts payable and accrued expenses (8,582 ) 15,194 Income taxes payable (3,951 ) 1,455 Deferred revenue 124 589 Other current liabilities 2,639 7,398 Retainage payable (1,308 ) 474 Other liabilities 385 2,878 Net cash used in operating activities (5,329 ) (3,592 ) Cash flows from investing activities: Purchase of business, net of cash acquired — (4,384 ) Payments for purchase of property and equipment (2,584 ) (11,447 ) Net cash used in investing activities (2,584 ) (15,831 ) Cash flows from financing activities: Payments on term loans (900 ) (900 ) Net borrowings on revolving loans 8,950 15,152 Proceeds from Philadelphia Industrial Development Corporation loan — 750 Payments on Philadelphia Industrial Development Corporation loan (41 ) (27 ) Deferred acquisition price payments (1,531 ) — Dividends paid to noncontrolling interest (111 ) (130 ) Proceeds from stock issued under employee stock purchase plan 65 57 Proceeds from exercise of stock options 220 137 Net cash provided by financing activities 6,652 15,039 Effect of exchange rate changes on cash (1,609 ) (1,839 ) Net decrease in cash and cash equivalents (2,870 ) (6,223 ) Cash and cash equivalents — beginning of period 24,089 30,124 Cash and cash equivalents — end of period $ 21,219 $ 23,901 business and mitigate the risks associated with COVID-19 for the next 12 months from May 7, 2020, the date of this filing. Additional disclosure on the impact of COVID-19 on the Company's is included in Item 2 Management's Discussion and Analysis within the Overview section of this Form 10-Q. the Company’s operating segment is provided in Note September 30, 2016 December 31, 2015 Billed $ 256,840 $ 267,592 Retainage, current portion 9,763 13,660 Unbilled 35,551 25,913 302,154 307,165 Allowance for doubtful accounts (72,262 ) (63,748 ) $ 229,892 $ 243,417 September 30, 2016 December 31, 2015 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Client relationships $ 34,116 $ 24,147 $ 34,891 22,668 Acquired contract rights 2,278 2,011 12,256 11,287 Trade names 2,774 1,450 2,704 1,237 Total $ 39,168 $ 27,608 $ 49,851 $ 35,192 Intangible assets, net $ 11,560 $ 14,659 Three Months Ended Nine Months Ended 2016 2015 2016 2015 $ 1,013 $ 1,578 $ 3,450 $ 4,609 $27 and $114, respectively. Estimated Amortization Year Ending December 31, Expense 2016 (remaining 3 months) $ 903 2017 3,144 2018 2,051 2019 1,782 2020 1,286 years: Project Construction Total Management Claims Goodwill Balance, December 31, 2015 $ 49,739 $ 25,154 $ 74,893 Additions — — — Translation adjustments 2,578 (1,572 ) 1,006 Balance, September 30, 2016 $ 52,317 $ 23,582 $ 75,899 the three months ended March 31, 2020: September 30, 2016 December 31, 2015 Accounts payable $ 36,884 $ 44,200 Accrued payroll 48,379 50,724 Accrued subcontractor fees 7,831 5,905 Accrued agency fees 2,285 6,564 Accrued legal and professional fees 5,336 1,186 Other accrued expenses 5,110 3,878 $ 105,825 $ 112,457 expenses: September 30, 2016 December 31, 2015 Term Loan Facility $ 112,890 $ 112,906 U.S. Revolving Credit Facility 22,500 17,500 International Revolving Credit Facility 11,836 10,715 Borrowings under revolving credit facilities with a consortium of banks in Spain 3,062 3,013 Borrowing under revolving credit facility with the National Bank of Abu Dhabi 2,998 — Borrowing from Philadelphia Industrial Development Corporation 669 710 Other notes payable — 139 153,955 144,983 Less current maturities 7,316 4,357 Notes payable and long-term debt, net of current maturities $ 146,639 $ 140,626 of March 31, 2020 and December 31, 2019. See additional information below related to this secured revolving credit facility. of 3.00 to 1.00 for any fiscal quarter ending on or subsequent to March 31, 2017 for the trailing twelve months then-ended. The Consolidated Net Leverage Ratio is the ratio of (a) consolidated total debt (minus unrestricted cash Facility. Nine Months Ended September 30, 2016 2015 Interest and related financing fees paid $ 8,915 $ 9,067 Income taxes paid $ 9,435 $ 4,242 Increase in other current liabilities and decrease in additional paid-in capital related to ESA Put Options $ 2,670 — Reduction of noncontrolling interest in connection with acquisition of an additional interest in Engineering S.A. $ — $ (4,374 ) Increase in property and equipment from a tenant improvement allowance related to the relocation of the corporate headquarters $ — $ 3,894 Increase in additional paid in capital from issuance of shares of common stock related to purchase of CPI $ — $ 530 Increase in additional paid in capital from issuance of shares of common stock through cashless exercise of stock options $ 729 $ 361 Hill International, Noncontrolling Total Inc. Stockholders Interests Stockholders’ equity, December 31, 2015 $ 118,039 $ 113,969 $ 4,070 Net (loss) earnings (3,824 ) (3,926 ) 102 Other comprehensive (loss) (1,122 ) 203 (1,325 ) Comprehensive earnings (loss) (4,946 ) (3,723 ) (1,223 ) Additional paid in capital 2,851 2,851 — Cashless exercise of stock options (729 ) (729 ) — Adjustment related to ESA Put Options (2,670 ) (2,670 ) Dividends paid to noncontrolling interest (111 ) — (111 ) Stockholders’ equity, September 30, 2016 $ 112,434 $ 109,698 $ 2,736 following: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 U.S. Foreign Total U.S. Foreign Total Earnings (loss) before income taxes $ (7,316 ) $ 3,441 $ (3,875 ) $ (2,541 ) $ 10,087 $ 7,546 Income tax expense, net $ — $ 2,880 $ 2,880 $ — $ 4,210 $ 4,210 Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 U.S. Foreign Total U.S. Foreign Total Earnings (loss) before income taxes $ (20,805 ) $ 23,920 $ 3,115 $ (22,529 ) $ 39,229 $ 16,700 Income tax expense, net $ — $ 6,939 $ 6,939 $ — $ 7,980 $ 7,980 that have a history of negative earnings. 2019, respectively. three months ended March 31, 2020, and 2019, respectively. operations: Three Months Ended September 30, 2016 2015 Project Management $ 106,868 72.2 % $ 116,541 73.5 % Construction Claims 41,125 27.8 42,038 26.5 Total $ 147,993 100.0 % $ 158,579 100.0 % Three Months Ended September 30, 2016 2015 Project Management $ 125,872 74.9 % $ 135,539 75.7 % Construction Claims 42,081 25.1 43,396 24.3 Total $ 167,953 100.0 % $ 178,935 100.0 % by Geographic Region: Three Months Ended September 30, 2016 2015 U.S./Canada $ 6,546 $ 5,939 Latin America (238 ) 531 Europe 13 2,105 Middle East 4,165 11,935 Africa 1,023 (398 ) Asia/Pacific (1,466 ) (105 ) Corporate (10,550 ) (8,314 ) Total $ (507 ) $ 11,693 U.S $ 6,297 $ 5,686 Non - U.S. 3,746 14,321 Corporate (10,550 ) (8,314 ) Total $ (507 ) $ 11,693 Three Months Ended September 30, 2016 2015 Project Management $ 1,646 $ 1,924 Construction Claims 705 787 Subtotal segments 2,351 2,711 Corporate 154 152 Total $ 2,505 $ 2,863 Three Months Ended September 30, 2016 2015 U.S./Canada $ 42,756 28.9 % $ 38,569 24.3 % Latin America 5,832 3.9 8,347 5.3 Europe 20,953 14.2 23,476 14.8 Middle East 62,609 42.3 72,441 45.7 Africa 7,201 4.9 7,225 4.5 Asia/Pacific 8,642 5.8 8,521 5.4 Total $ 147,993 100.0 % $ 158,579 100.0 % U.S. $ 42,000 28.4 % $ 37,854 23.9 % Non-U.S. 105,993 71.6 120,725 76.1 Total $ 147,993 100.0 % $ 158,579 100.0 % Three Months Ended September 30, 2016 2015 U.S./Canada $ 57,687 34.3 % $ 53,554 29.9 % Latin America 5,867 3.5 8,398 4.7 Europe 21,978 13.1 24,814 13.9 Middle East 65,617 39.1 75,320 42.1 Africa 8,076 4.8 8,205 4.6 Asia/Pacific 8,728 5.2 8,644 4.8 Total $ 167,953 100.0 % $ 178,935 100.0 % U.S. $ 56,920 33.9 % $ 52,774 29.5 % Non-U.S. 111,033 66.1 126,161 70.5 Total $ 167,953 100.0 % $ 178,935 100.0 % Three Months Ended September 30, 2016 2015 U.S. federal government $ 2,382 1.6 % $ 2,295 1.4 % U.S. state, regional and local governments 26,540 17.9 21,630 13.6 Foreign governments 41,971 28.4 51,136 32.3 Private sector 77,100 52.1 83,518 52.7 Total $ 147,993 100.0 % $ 158,579 100.0 % party. Three Months Ended September 30, 2016 2015 U.S. federal government $ 3,088 1.8 % $ 2,802 1.6 % U.S. state, regional and local governments 41,553 24.7 34,793 19.4 Foreign governments 45,450 27.1 54,578 30.5 Private sector 77,862 46.4 86,762 48.5 Total $ 167,953 100.0 % $ 178,935 100.0 % September 30, 2016 December 31, 2015 U.S./Canada $ 13,388 $ 13,581 Latin America 991 1,031 Europe 2,943 3,084 Middle East 3,394 3,980 Africa 848 1,120 Asia/Pacific 743 955 Total $ 22,307 $ 23,751 U.S. $ 13,388 $ 13,581 Non-U.S. 8,919 10,170 Total $ 22,307 $ 23,751 Nine Months Ended September 30, 2016 2015 Project Management $ 333,573 72.8 % $ 345,122 73.5 % Construction Claims 124,339 27.2 124,336 26.5 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 Project Management $ 392,087 75.4 % $ 402,586 75.8 % Construction Claims 127,676 24.6 128,265 24.2 Total $ 519,763 100.0 % $ 530,851 100.0 % Nine Months Ended September 30, 2016 2015 U.S. / Canada $ 16,266 $ 13,158 Latin America (769 ) 262 Europe 1,987 1,028 Middle East 23,201 41,130 Africa 1,910 (158 ) Asia/Pacific (1,515 ) (830 ) Corporate (27,862 ) (26,638 ) Total $ 13,218 $ 27,952 U.S. $ 15,603 $ 12,336 Non - U.S. 25,477 42,254 Corporate (27,862 ) (26,638 ) Total $ 13,218 $ 27,952 Nine Months Ended September 30, 2016 2015 Project Management $ 5,038 $ 5,637 Construction Claims 2,204 2,349 Subtotal segments 7,242 7,986 Corporate 463 300 Total $ 7,705 $ 8,286 Nine Months Ended September 30, 2016 2015 U.S./Canada $ 123,416 27.0 % $ 113,735 24.2 % Latin America 17,728 3.9 23,011 4.9 Europe 64,555 14.1 64,905 13.8 Middle East 205,385 44.9 222,572 47.5 Africa 20,950 4.6 21,329 4.5 Asia/Pacific 25,878 5.5 23,906 5.1 Total $ 457,912 100.0 % $ 469,458 100.0 % U.S. $ 121,287 26.5 % $ 111,436 23.7 % Non-U.S. 336,625 73.5 358,022 76.3 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 U.S./Canada $ 170,027 32.7 % $ 159,169 30.0 % Latin America 17,831 3.4 23,092 4.3 Europe 67,347 13.0 68,534 12.9 Middle East 214,750 41.3 231,314 43.6 Africa 23,706 4.6 24,444 4.6 Asia/Pacific 26,102 5.0 24,298 4.6 Total $ 519,763 100.0 % $ 530,851 100.0 % U.S. $ 167,819 32.3 % $ 156,715 29.5 % Non-U.S. 351,944 67.7 374,136 70.5 Total $ 519,763 100.0 % $ 530,851 100.0 % Nine Months Ended September 30, 2016 2015 U.S. federal government $ 7,252 1.6 % $ 7,061 1.5 % U.S. state, regional and local governments 74,663 16.3 63,921 13.6 Foreign governments 139,499 30.5 160,694 34.2 Private sector 236,498 51.6 237,782 50.7 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 U.S. federal government $ 8,809 1.7 % $ 8,651 1.6 % U.S. state, regional and local governments 117,369 22.6 101,402 19.1 Foreign governments 150,010 28.9 171,615 32.4 Private sector 243,575 46.8 249,183 46.9 Total $ 519,763 100.0 % $ 530,851 100.0 % bookings, Consulting Fee Revenue Three Months Ended September 30, 2016 2015 Change Project Management $ 106,868 72.2 % $ 116,541 73.5 % $ (9,673 ) (8.3 )% Construction Claims 41,125 27.8 42,038 26.5 (913 ) (2.2 ) Total $ 147,993 100.0 % $ 158,579 100.0 % $ (10,586 ) (6.7 )% the Coronavirus Aid Relief and Economic Security Act (the "CARES Act") and intend to apply for additional loan proceeds through this program. 12 months from the date of this report. Three Months Ended September 30, 2016 2015 Change Project Management $ 19,004 95.2 % $ 18,998 93.3 % $ 6 — % Construction Claims 956 4.8 1,358 6.7 (402 ) (29.6 ) Total $ 19,960 100.0 % $ 20,356 100.0 % $ (396 ) (1.9 )% Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 63,325 77.9 % 59.3 % $ 70,459 78.9 % 60.5 % $ (7,134 ) (10.1 )% Construction Claims 17,916 22.1 43.6 18,886 21.1 44.9 (970 ) (5.1 ) Total $ 81,241 100.0 % 54.9 % $ 89,345 100.0 % 56.3 % $ (8,104 ) (9.1 )% Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 43,543 65.2 % 40.7 % $ 46,082 66.6 % 39.5 % $ (2,539 ) (5.5 )% Construction Claims 23,209 34.8 56.4 23,152 33.4 55.1 57 0.2 Total $ 66,752 100.0 % 45.1 % $ 69,234 100.0 % 43.7 % $ (2,482 ) (3.6 )% Three Months Ended September 30, 2016 2015 Change % of % of CFR CFR SG&A Expenses $ 67,247 45.4 % $ 57,527 36.3 % $ 9,720 16.9 % the Western Region. Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 6,500 6.1 % $ 15,438 13.2 % $ (8,938 ) (57.9 )% Share of loss of equity method affiliate (12 ) (0.0 ) (14 ) (0.0 ) 2 14.3 Total Project Management 6,488 6.1 15,424 13.2 (8,936 ) (57.9 ) Construction Claims 3,554 8.6 4,582 10.9 (1,028 ) (22.4 ) Corporate (10,549 ) (8,313 ) (2,236 ) 26.9 Total $ (507 ) (0.3 )% $ 11,693 7.4 % $ (12,200 ) (104.3 )% Nine Months Ended September 30, 2016 2015 Change Project Management $ 333,573 72.8 % $ 345,122 73.5 % $ (11,549 ) (3.3 )% Construction Claims 124,339 27.2 124,336 26.5 3 — Total $ 457,912 100.0 % $ 469,458 100.0 % $ (11,546 ) (2.5 )% Nine Months Ended September 30, 2016 2015 Change Project Management $ 58,514 94.6 % $ 57,464 93.6 % $ 1,050 1.8 % Construction Claims 3,337 5.4 3,929 6.4 (592 ) (15.1 ) Total $ 61,851 100.0 % $ 61,393 100.0 % $ 458 0.7 % Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 209,470 79.0 % 62.8 % $ 212,565 79.3 % 61.6 % $ (3,095 ) (1.5 )% Construction Claims 55,582 21.0 44.7 55,609 20.7 44.7 (27 ) (0.0 ) Total $ 265,052 100.0 % 57.9 % $ 268,174 100.0 % 57.1 % $ (3,122 ) (1.2 )% Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 124,103 64.3 % 37.2 % $ 132,557 65.9 % 38.4 % $ (8,454 ) (6.4 )% Construction Claims 68,757 35.7 55.3 68,727 34.1 55.3 30 — Total $ 192,860 100.0 % 42.1 % $ 201,284 100.0 % 42.9 % $ (8,424 ) (4.2 )% Nine Months Ended September 30, 2016 2015 Change % of % of CFR CFR SG&A Expenses $ 179,614 39.2 % $ 173,101 36.9 % $ 6,513 3.8 % Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 30,123 9.0 % $ 43,268 12.5 % $ (13,145 ) (30.4 )% Share of loss of equity method affiliate (28 ) (0.0 ) (231 ) (0.1 ) 203 (87.9 ) Total Project Management 30,095 9.0 43,037 12.4 (12,942 ) (30.1 ) Construction Claims 10,983 8.8 11,687 9.4 (704 ) (6.0 ) Corporate (27,860 ) (26,772 ) (1,088 ) 4.1 Total $ 13,218 2.9 % $ 27,952 6.0 % $ (14,734 ) (52.7 ) Three Months Ended Nine Months Ended 2016 2015 2016 2015 Net (loss) earnings $ (6,866 ) $ 2,948 $ (3,926 ) $ 8,045 Interest expense, net 3,368 4,147 10,103 11,252 Income tax expense 2,880 4,210 6,939 7,980 Depreciation and amortization 2,505 2,863 7,705 8,286 EBITDA $ 1,887 $ 14,168 $ 20,821 $ 35,563 facilities. We also have relationships with other foreign banks for the issuance of letters of credit, letters of guarantee and performance bonds in a variety of foreign currencies. At We intend to apply for additional loan funding under the Main Street Lending Program announced by the U.S. Treasury as part of the Cares Act when applications become available, subject to the final terms and conditions of the program. normal first quarter collections. payable. business. Total Backlog 12-Month Backlog $ % $ % (dollars in thousands) As of September 30, 2016: Project Management $ 888,000 94.1 % $ 358,000 86.7 % Construction Claims 56,000 5.9 % 55,000 13.3 % Total $ 944,000 100.0 % $ 413,000 100.0 % U.S./Canada $ 433,000 45.9 % $ 154,000 37.3 % Latin America 14,000 1.5 11,000 2.7 Europe 51,000 5.4 32,000 7.7 Middle East 369,000 39.1 164,000 39.7 Africa 50,000 5.3 27,000 6.5 Asia/Pacific 27,000 2.8 25,000 6.1 Total $ 944,000 100.0 % $ 413,000 100.0 % As of June 30, 2016: Project Management $ 892,000 94.0 % $ 357,000 86.2 % Construction Claims 57,000 6.0 57,000 13.8 Total $ 949,000 100.0 % $ 414,000 100.0 % U.S./Canada $ 399,000 42.0 % $ 137,000 33.1 % Latin America 15,000 1.6 13,000 3.1 Europe 53,000 5.6 36,000 8.7 Middle East 400,000 42.1 178,000 43.0 Africa 53,000 5.6 26,000 6.3 Asia/Pacific 29,000 3.1 24,000 5.8 Total $ 949,000 100.0 % $ 414,000 100.0 % As of September 30, 2015: Project Management $ 830,000 94.4 % $ 353,000 88.9 % Construction Claims 49,000 5.6 % 44,000 11.1 % Total $ 879,000 100.0 % $ 397,000 100.0 U.S./Canada $ 362,000 41.2 % $ 120,000 30.2 % Latin America 28,000 3.2 17,000 4.3 Europe 54,000 6.1 37,000 9.3 Middle East 350,000 39.8 180,000 45.3 Africa 41,000 4.7 19,000 4.8 Asia/Pacific 44,000 5.0 24,000 6.1 Total $ 879,000 100.0 % $ 397,000 100.0 % XBRL Instance Document. XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Presentation Linkbase Document. XBRL Taxonomy Calculation Linkbase Document. XBRL Taxonomy Label XBRL Taxonomy Extension Definition Linkbase Document. Chief Executive Officer (Principal Executive Officer) By: /s/ Senior Vice President andthousands, except per share data) March 31, 2020 December 31, 2019 Assets (Unaudited) Cash and cash equivalents $ 16,083 $ 15,915 Cash - restricted 3,489 4,666 Accounts receivable, net 108,109 103,892 Current portion of retainage receivable 16,040 16,459 Accounts receivable - affiliates 24,919 18,776 Prepaid expenses and other current assets 11,879 9,340 Income tax receivable 2,176 2,256 Total current assets 182,695 171,304 Property and equipment, net 10,167 11,895 Cash - restricted, net of current portion 3,921 4,401 Operating lease right-of-use assets 15,781 17,451 Retainage receivable 6,433 5,695 Acquired intangibles, net 205 232 Goodwill 44,591 48,024 Investments 1,628 1,711 Deferred income tax assets 3,074 3,800 Other assets 3,060 5,038 Total assets $ 271,555 $ 269,551 Liabilities and Stockholders’ Equity Current maturities of notes payable and long-term debt $ 3,071 $ 1,792 Accounts payable and accrued expenses 66,394 65,172 Income taxes payable 3,586 3,152 Current portion of deferred revenue 9,090 10,773 Current portion of operating lease liabilities 5,481 5,736 Other current liabilities 6,065 4,876 Total current liabilities 93,687 91,501 Notes payable and long-term debt, net of current maturities 50,470 41,150 Retainage payable 1,581 1,551 Deferred income taxes 418 419 Deferred revenue 1,437 3,041 Non-current operating lease liabilities 15,850 17,030 Other liabilities 4,882 4,631 Total liabilities 168,325 159,323 Commitments and contingencies Stockholders’ equity: Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued — — Common stock, $0.0001 par value; 100,000 shares authorized, 62,530 shares and 62,708 shares issued at March 31, 2020 and December 31, 2019, respectively 6 6 Additional paid-in capital 213,263 212,759 Accumulated deficit (77,941 ) (71,360 ) Accumulated other comprehensive loss (3,913 ) (3,817 ) Less treasury stock of 6,807 and 6,546 at March 31, 2020 and December 31, 2019, respectively (29,056 ) (28,231 ) Hill International, Inc. share of equity 102,359 109,357 Noncontrolling interests 871 871 Total equity 103,230 110,228 Total liabilities and stockholders’ equity $ 271,555 $ 269,551 Three Months Ended
March 31, 2020 2019 Consulting fee revenue $ 77,150 $ 79,000 Reimbursable expenses 16,158 19,683 Total revenue $ 93,308 $ 98,683 Direct expenses 65,048 67,247 Gross profit $ 28,260 $ 31,436 Selling, general and administrative expenses 32,149 31,311 Plus: Share of profit of equity method affiliates 24 414 Operating (loss) profit $ (3,865 ) $ 539 Interest and related financing fees, net 1,299 1,512 Other income, net 345 — Loss before income taxes $ (4,819 ) $ (973 ) Income tax expense 1,603 1,095 Net loss $ (6,422 ) $ (2,068 ) Less: net earnings - non-controlling interests 159 67 Net loss attributable to Hill International, Inc. $ (6,581 ) $ (2,135 ) Basic loss per common share - Hill International, Inc. $ (0.12 ) $ (0.04 ) Basic weighted average common shares outstanding 56,543 55,946 Diluted loss per common share - Hill International, Inc. $ (0.12 ) $ (0.04 ) Diluted weighted average common shares outstanding 56,543 55,946
September 30,
September 30, Three Months Ended March 31, 2020 2019 Net loss $ (6,422 ) $ (2,068 ) Foreign currency translation adjustment, net of tax (255 ) (1,854 ) Comprehensive loss (6,677 ) (3,922 ) Less: Comprehensive (loss) income attributable to non-controlling interests — 19 Comprehensive loss attributable to Hill International, Inc. $ (6,677 ) $ (3,941 ) (Unaudited) Common Stock Treasury Stock Hill Share of Stockholders’ Non-controlling Shares Amount Capital (Deficit) (Loss) Shares Amount Equity Interests Equity Balance - December 31, 2019 62,708 $ 6 $ 212,759 $ (71,360 ) $ (3,817 ) 6,546 $ (28,231 ) $ 109,357 $ 871 $ 110,228 Net income (loss) — — — (6,581 ) — — — (6,581 ) 159 (6,422 ) Other comprehensive loss — — — — (96 ) — — (96 ) (159 ) (255 ) Share-based compensation expense — — 399 — — — — 399 — 399 Shares issued under employee stock purchase plan (1) 83 — 105 — — — — 105 — 105 Transfer of shares pledged as collateral (2) (261 ) — — — — 261 (825 ) (825 ) — (825 ) Balance - March 31, 2020 62,530 $ 6 $ 213,263 $ (77,941 ) $ (3,913 ) 6,807 $ (29,056 ) $ 102,359 $ 871 $ 103,230 Balance - December 31, 2018 62,181 $ 6 $ 210,084 $ (85,444 ) $ (2,575 ) 6,546 $ (28,231 ) $ 93,840 $ 605 $ 94,445 Net income (loss) — — — (2,135 ) — — — (2,135 ) 67 (2,068 ) Other comprehensive loss — — — — (1,806 ) — — (1,806 ) (48 ) (1,854 ) Shares issued to Board of Directors 24 — — — — — — — — — Share-based compensation expense — — 241 — — — — 241 — 241 Balance - March 31, 2019 62,205 $ 6 $ 210,325 $ (87,579 ) $ (4,381 ) �� 6,546 $ (28,231 ) $ 90,140 $ 624 $ 90,764 Notes Three Months Ended March 31, 2020 2019 Cash flows from operating activities: Net loss $ (6,422 ) $ (2,068 ) Adjustments to reconcile net loss to net cash provided by (used in): Depreciation and amortization 2,424 791 (Recovery) provision for bad debts (479 ) 934 Amortization of deferred loan fees 175 179 Deferred tax expense (benefit) 490 (349 ) Share-based compensation 399 241 Operating lease right-of-use assets 1,575 1,408 Foreign currency remeasurement losses (gains) 4,376 (511 ) Changes in operating assets and liabilities: Accounts receivable (4,203 ) 5,390 Accounts receivable - affiliate (6,143 ) (218 ) Prepaid expenses and other current assets (2,608 ) 551 Income taxes receivable (45 ) (199 ) Retainage receivable (755 ) (1,247 ) Other assets 1,231 690 Accounts payable and accrued expenses 1,964 6,851 Income taxes payable 431 1,020 Deferred revenue (2,994 ) (3,423 ) Operating lease liabilities (1,323 ) (1,442 ) Other current liabilities 696 31 Retainage payable 29 51 Other liabilities 250 (222 ) Net cash (used in) provided by operating activities (10,932 ) 8,458 Cash flows from investing activities: Purchase of property and equipment (833 ) (873 ) Net cash used in investing activities (833 ) (873 ) Cash flows from financing activities: Repayment of term loans (217 ) (266 ) Proceeds from revolving loans 18,792 9,854 Repayment of revolving loans (7,836 ) (8,662 ) Proceeds from stock issued under employee stock purchase plan 50 34 Net cash provided by financing activities 10,789 960 Effect of exchange rate changes on cash, cash equivalents and restricted cash (513 ) (1,033 ) Net (decrease) increase in cash, cash equivalents and restricted cash (1,489 ) 7,512 Cash, cash equivalents and restricted cash — beginning of period 24,982 23,107 Cash, cash equivalents and restricted cash — end of period $ 23,493 $ 30,619 Three Months Ended March 31, Supplemental disclosures of cash flow information: 2020 2019 Interest and related financing fees paid $ 1,150 $ 1,414 Income taxes paid 87 601 Cash paid for amounts included in the measurement of lease liabilities 1,910 1,814 — 18,178 Consolidated Financial Statementsthe Company's January 1, 2019 adoption of Accounting Standards Update 2016-2, Leases (Topic 842).-— The Company construction claims and other consulting services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. Hill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.organized into two key operating divisions:focused on preserving its principal sources of liquidity and managing its cash flow and will continue to evaluate the Project Management Grouppotential short-term and long-term implications of COVID-19 on its consolidated statements of operations. The Company has also implemented various actions and policies that is expected to result in approximately $10,000 in cost reductions. The Company believes that it has adequate liquidity and business plans to continue to operate the Construction Claims Group.23 — Basis of Presentation2015.2019. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles generally accepted in the United States (“GAAP”("U.S. GAAP") for complete financial statements. In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements. The consolidated financial statements include the accounts of Hill and its wholly-wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.Note 3 — Liquidityamountrelated 2019 prior period operating profit (loss) by geographic region and corporate costs have been recast to reflect this change. This change only affects the presentation in the operating profit/(loss) tables and has no impact on total operating profit/(loss) reported.(“CFR”("CFR") attributableand reimbursable expenses to conform to current year presentation. CFR is the revenue, excluding reimbursable costs. The Company believes that CFR is an important measure because it represents the revenue on which gross profit is earned.Middle Eastperiod the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and Africaothers are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed for each subsequent reporting period until the project is complete. Such revisions could occur at any time and the effects may be material.grown from approximately 32%been completed, which typically is greater than one year.2011 to approximately 49%the statements of total consolidated CFRcash flows: March 31, 2020 December 31, 2019 Cash and cash equivalents $ 16,083 $ 15,915 Cash - restricted 3,489 4,666 Cash - restricted, net of current portion 3,921 4,401 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 23,493 $ 24,982 first nineperiod. Diluted earnings (loss) per common share incorporates the incremental shares issuable upon the assumed exercise of stock options, the assumed vesting of stock and deferred and restricted stock unit awards using the treasury stock method, if dilutive. Three Months Ended March 31, 2020 2019 Net loss $ (6,422 ) $ (2,068 ) Less: net earnings - non-controlling interests 159 67 Net loss attributable to Hill International, Inc. $ (6,581 ) $ (2,135 ) Basic weighted average common shares outstanding 56,543 55,946 Effect of dilutive securities: Stock options — — Unvested share-based compensation units $ — $ — Diluted weighted average common shares outstanding 56,543 55,946 Basic and diluted net loss per share attributable to Hill $ (0.12 ) $ (0.04 ) 2016.accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.has beenwas no impact on the Company's consolidated financial statements on the date of implementation.political upheaval and civil unrestreversal in these regions during this period. Thethe amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If the Company continues to work and is uncertain that a contract change order will be processed, the variable consideration will be constrained to the cap until it is probable that the contract will be renegotiated. The Company is only entitled to consideration for the work it has performed, and the cap value is not a guaranteed contract value.slowdownproject by project basis, the appropriate final revenue recognition.its collectionsexcess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.Middle East primarily dueU.S. government that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“FAR”). These regulations are generally applicable to all of its federal government contracts and are partially or fully incorporated in many local and state agency contracts. They limit the recovery of certain specified indirect costs on contracts subject to the recent drop in oil prices. This has put a considerable strain onFAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of the Company's federal government contracts are subject to termination at the convenience of the federal government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.liquidity. As a result,overhead rates, cost proposals, incurred government contract costs and internal control systems. During the course of its audits, the DCAA may question incurred costs if it believes the Company has had to rely heavily on debtaccounted for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and equity transactions to fundrecommend that its operations. See Note 4U.S. government corporate administrative contracting officer disallow such costs. Historically, the Company has not incurred significant disallowed costs because of such audits. However, the Company can provide no assurance that the DCAA audits will not result in material disallowances of incurred costs in the future. The Company provides for a further discussionrefund liability to the extent that it expects to refund some of issuesthe consideration received from a client.our liquidity.412 - Segment and Related Information. The Project Management Group provides extensive construction and project management services to construction owners worldwide. The Company considered the type of client, type of contract and geography for disaggregation of revenue. The Company determined that disaggregating by (1) contract type; and (2) geography would provide the most meaningful information to understand the nature, amount, timing, and uncertainty of its revenues. The type of client does not influence the Company’s revenue generation. Ultimately, the Company is supplying the same services of program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, labor compliance services and facilities management services. The Company’s contracts are generally long term contracts that are either based upon time and materials incurred or provide for a fixed price. The contract type will determine the level of risk in the contract related to revenue recognition. For purposes of disaggregation of revenue, the contract types have been grouped into: (1) Fixed Price - which include fixed price projects; and, (2) T&M - which include T&M contracts, T&M with a cap and cost plus contracts. The geography of the contracts will depict the level of global economic factors in relation to revenue recognition. Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Fixed Price T&M Total Percent of Total Revenue Fixed Price T&M Total Percent of Total Revenue United States $ 5,023 $ 40,997 $ 46,020 49.3 % $ 3,433 $ 44,669 $ 48,102 48.7 % Latin America 1,171 — 1,171 1.3 % 2,016 418 2,434 2.5 % Europe 6,429 5,108 11,537 12.4 % 6,051 5,283 11,334 11.5 % Middle East 4,883 19,689 24,572 26.3 % 11,365 16,946 28,311 28.7 % Africa 206 7,091 7,297 7.8 % 571 6,378 6,949 7.0 % Asia/Pacific — 2,711 2,711 2.9 % 300 1,253 1,553 1.6 % Total $ 17,712 $ 75,596 $ 93,308 100.0 % $ 23,736 $ 74,947 $ 98,683 100.0 % follows (in thousands):Included in billedfollows:Accounts Receivable March 31, 2020 December 31, 2019 $ 128,320 $ 132,339 35,122 30,026 163,442 162,365 (55,333 ) (58,473 ) Accounts receivable, net $ 108,109 $ 103,892 Accounts Receivable - Affiliates $ 13,895 $ 12,546 11,658 6,888 $ 25,553 $ 19,434 Allowance for doubtful accounts (634 ) (658 ) Accounts receivable - affiliates, net $ 24,919 $ 18,776 unbilled accounts receivable are $14,926,000 and $4,827,000, respectively,$32,864 related to change orders, claimsamounts due from a client in Africa as of March 31, 2020 and disputes at September 30, 2016.December 31, 2019, respectively.In 2012, the Company commenced operations on the Muscat International Airport (the “Oman Airport”) project with the Ministry of Transportation and Communications (the “MOTC”) in Oman. The original contract term expired in November 2014. In October 2014, the Company applied for a twelve-month extension of time amendment (the “first extension”) which was subsequently approved in March 2016 and the Company continued to work on the Oman Airport project. The Company began to experience some delays in payment during the second quarter of 2015 when MOTC commenced its formal review and certification of the Company’s invoices. In December 2015, the Company began discussions with the MOTC on a second extension of time amendment (the “second extension”) and has since commenced additional work, which management expects to last approximately 18 months. When the MOTC resumed payments in 2016, the Company received approximately $15,000,000 in March, approximately $1,800,000 in April, approximately $14,100,000 in June, approximately $3,200,000 in October and approximately $7,900,000 in November. At September 30, 2016, accounts receivable from Oman totaled approximately $29,500,000. After receipt of the October and November payments, approximately $7,900,000 was past due based on contractual terms.In addition, there is approximately $16,100,000 included in non-current Retainage Receivable in the consolidated balance sheet at September 30, 2016. Of that amount, approximately $8,000,000 relates to retention and approximately $8,100,000 relates to a Defect and Liability Period (“DLP”). Retention represents five percent of each monthly invoice which is retained by MOTC. Fifty percent of the retention will be released one year from the commencement of the DLP and the balance will be release upon the issuance of final Completion Certificates. DLP represents the period by which the contractor must address any defect issues. This period commences upon the issuance of a “Taking Over Certificate” (by MOTC) to contractors for up to a period of 24 months and then final certificate closing the project.The delays in payments from MOTC and other foreign governments have had a negative impact on the Company’s liquidity, financial covenants, financial position and results of operations.56 — Intangible Assetsassets (in thousands):Amortization expense related toassets: March 31, 2020 December 31, 2019 Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization Client relationships $ 1,080 $ 875 $ 1,080 $ 848 Total $ 1,080 $ 875 $ 1,080 $ 848 Intangible assets, net $ 205 $ 232 as follows (in thousands):
September 30,
September 30,based on our present intangible assets for the next five years (in thousands): Year ending December 31, 2020 (remaining 9 months) $ 52 2021 51 2022 51 2023 51 2024 — 67 — GoodwillThe Company performs its annual goodwill impairment testing, by reporting unit, in the third quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company performed its annual impairment test effective July 1, 2016. Based on a preliminary valuation, the fair value of the Project Management unit and the Construction Claims unit significantly exceeded their carrying values.2016 (in thousands): Balance, December 31, 2019 $ 48,024 (3,433 ) Balance, March 31, 2020 $ 44,591 78 — Accounts Payable and Accrued Expensesexpenses (in thousands): March 31, 2020 December 31, 2019 Accounts payable $ 25,659 $ 22,102 Accrued payroll and related expenses 27,546 28,874 Accrued subcontractor fees 8,966 9,405 Accrued agency fees 193 239 Accrued legal and professional fees 1,787 2,169 Other accrued expenses 2,243 2,383 $ 66,394 $ 65,172 89 — Notes Payable and Long-Term DebtOutstandingobligationswhich includes credit facilities: Balance Outstanding as of Loan Maturity Interest Rate Type March 31,
2020December 31,
2019 March 31,
2020December 31,
2019Secured Credit Facilities Hill International, Inc. - Société Générale 2017 Term Loan Facility 06/20/2023 Variable 7.86% 7.92% $ 29,175 $ 29,250 Hill International, Inc. - Société Générale Domestic Revolving Credit Facility (2) 05/04/2022 Variable 6.18% 6.27% 18,400 9,400 Hill International N.V.. - Société Générale International Revolving Credit Facility (3) 05/04/2022 Variable 4.14% 4.16% 2,811 2,302 Unsecured Credit Facilities Hill International, Inc. - First Abu Dhabi Bank ("FAB") PJSC Overdraft Credit Facility (4) 04/18/2021 Variable 5.79% 5.81% 1,997 593 Hill International Brasil S.A. - Revolving Credit Facility (5) 06/12/2020 Fixed 2.80% 3.24% 386 498 Unsecured Notes Payable and Long-Term Debt Hill International Spain SA-Bankia S.A. & Bankinter S.A.(6) 12/31/2021 Fixed 2.21% 2.21% 907 1,054 Philadelphia Industrial Development Corporation Loan 03/31/2027 Fixed 2.79% 2.79% 466 486 Total notes payable and long-term debt, gross $ 54,142 $ 43,583 Less: unamortized discount and deferred financing costs related to Société Générale 2017 Term Loan Facility (601 ) (641 ) Notes payable and long-term debt $ 53,541 $ 42,942 Current portion of notes payable $ 3,258 $ 1,972 Current portion of unamortized debt discount and deferred financing costs $ (187 ) $ (180 ) Current maturities of notes payable and long-term debt $ 3,071 $ 1,792 Notes payable and long-term debt, net of current maturities $ 50,470 $ 41,150 follows (in thousands):its subsidiary Hill International N.V. (the “Subsidiary”)$2,538 of availability under the credit facility as of March 31, 2020 and December 31, 2019, respectively.parties to abased on conversion rates from Brazilian Real as of March 31, 2020 and December 31, 2019.agreementfacilities with Société Générale (the “Agent”"International Lender") and other U.S. Loan Parties (the "U.S. Lenders") under a 2017 Term Loan of $30,000 (the "2017 Term Loan Facility"), TD Bank, N.A. and HSBC Bank USA, N.A. (collectively,a $25,000 U.S.-denominated revolving credit facility (the "Domestic Revolving Credit Facility"; together with the “U.S. Lenders”) consisting of a term loan facility of $120,000,000 (the “Term Loan Facility”2017 Term, the "U.S. Credit Facilities") and a $30,000,000 U.S. dollar-denominated facility available to the Company (the “U.S. Revolver,” together with the Term Loan Facility, the “U.S. Credit Facilities”) and a credit agreement with the Agent (the “International Lender”) providing a €11,765,000€9,156 ($15,000,00010,000 at closing and $13,199,000 at September 30, 2016)closing) Euro-denominated revolving credit facility which is available to the Subsidiary (the “International Revolver” and together with the U.S. Revolver, the “Revolving"International Revolving Credit Facilities” and,Facility"; together with the U.S. Credit Facilities, the “Secured"Secured Credit Facilities”Facilities"). The U.S. Revolver and the International Revolver include sub-limits for letters of credit amounting to $25,000,000 and $10,000,000, respectively.The Secured Credit Facilities contain customary default provisions, representations and warranties, and affirmative and negative covenants, and require the Company to comply with certain financial and reporting covenants. The financial covenants consistcovenant is comprised of a maximum Consolidated Net Leverage Ratio and an Excess Account Concentration requirement.of up to $10,000,000 held in the aggregate)and cash equivalents) to consolidated earnings before interest, taxes, depreciation, amortization, share-based compensation and other non-cash charges, including bad debt expense, certain one-time litigation and transaction related expenses, and restructuring charges for the trailing twelve months. In the event of a default, the U.S. LendersLender and the International Lender may increase the interest rates by 2.0%. At September 30, 2016,The Company was in compliance with this financial covenant at March 31, 2020.Company’s Consolidated Net Leverage Ratio was 3.19 to 1.00 which exceeded the 2.75 to 1.00 limit imposed by the SecuredDomestic and International Revolving Credit Facilities were $1,175 and constituted a default.The Excess Account Concentration covenant permits the U. S. Lenders$1,317 at March 31, 2020 and the International Lender to increase the interest rates by 2.0% if, as of the last day of any fiscal quarter, either (a) the total of accounts receivable from all clients within any country not listed as a Permitted Country as definedDecember 31, 2019, respectively, and were included in the Secured Credit Facilities (other than the United Arab Emirates) that are more than 120 days old (relative to the invoice date) constitute more than 10% of the total outstanding accounts receivable or (b) the total of accounts receivable from all clients located in the United Arab Emirates that are more than 120 days old (relative to the invoice date) constitute more than 14% of the total outstanding accounts receivable. The interest rate would be reset as soon as the accounts receivable over 120 days decline below the 10% or 14% levels. At September 30, 2016, the accounts receivable from Oman exceeded the limit described above, however, due to a payment received on October 6, 2016, the accounts receivable declined below the established limit.In anticipation of the event of default upon delivery of the quarterly compliance certificate, the Company requested a waiver from the Agent. On November 1, 2016, the Company obtained the waiver of the Excess Account Concentration covenant violation, the Consolidated Net Leverage Ratio defaultprepaid expenses and the contractual 2% increase in the interest rate. In connection with the waiver, the Company incurred a consent fee amounting to approximately $168,000 which will be charged to interest expense in the fourth quarter of 2016.The U.S. Credit Facilities are guaranteed by certain U.S. subsidiaries of the Company,other current assets and the International Revolver is guaranteed by the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.Term Loan FacilityThe interest rate on the Term Loan Facility will be, at the Company’s option, either:· the London Inter-Bank Offered Rate (“LIBOR”) for the relevant interest period plus 6.75% per annum, provided that such LIBOR shall not be lower than 1.00% per annum; or· the Base Rate (as described below) plus 5.75% per annum.The “Base Rate” is a per annum rate equal to the highest of (A) the prime rate, (B) the federal funds effective rate plus 0.50%, or (C) the LIBOR for an interest period of one month plus 1.0% per annum. Upon a default, the applicable rate of interest under the Secured Credit Facilities may increase by 2.0%. The LIBOR on the Term Loan Facilities (including when determining the Base Rate) shall in no event be less than 1.0% per annum.At September 30, 2016, the interest rate on the Term Loan was 7.75%.The Company has the right to prepay the Term Loan Facility in full or in part at any time without premium or penalty. The Company is required to make mandatory prepayments of the Term Loan Facility, without premium or penalty, (i) with net proceeds of any issuance or incurrence of indebtedness (other than that permitted under the Term Loan Facility) by the Company, (ii) with net proceeds from certain asset sales outside the ordinary course of business, and (iii) with 50% of the excess cash flow (as defined in the agreement) for each fiscal year of the Borrowers (which percentage would be reduced to 25% if the Consolidated Net Leverage Ratio is equal to or less than 2.25 to 1.00 or reduced to 0% if the Consolidated Net Leverage Ratio is equal to or less than 1.50 to 1.00).The Term Loan Facility is generally secured by a first-priority security interest in substantially allother assets of the Company and certain of the Company’s U.S. subsidiaries other than accounts receivable, cash proceeds thereof and certain bank accounts, as to which the Term Loan Facility is secured by a second-priority security interest.The Term Loan Facility has a term of six years, requires repayment of 0.25% of the original principal amount on a quarterly basis through September 30, 2020, the maturity date. Any amounts repaid on the Term Loan Facility will not be available to be re-borrowed.The Company incurred fees and expenses related to the Term Loan Facility aggregating $7,066,000 which have been deferred. The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest and related financing fees, net over a six-year period which ends on September 30, 2020. Unamortized balances of $4,710,000 and $5,594,000 are included as an offset against the Term Loan balances in the consolidated balance sheets at September 30, 2016 and December 31, 2015, respectively.Revolving Credit FacilitiesThe interest rate on borrowings under the U.S. Revolver will be, at the Company’s option from time to time, either the LIBOR for the relevant interest period plus 3.75% per annum or the Base Rate plus 2.75% per annum. At September 30, 2016, the interest rate was 6.25%.The interest rate on borrowings under the International Revolver will be the European Inter-Bank Offered Rate (“EURIBOR”) for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available) plus 4.00% per annum. At September 30, 2016, the interest rate was 3.63%.The Company will pay a commitment feesheets.U.S. Revolver,Domestic Revolving Credit Facility, and the Subsidiary will pay a commitment feeare calculated at 0.75% annually on the average daily unused portion of the International Revolver.The ability to borrow under each of the U.S. Revolver and the International Revolver is subject to a “borrowing base,” calculated using a formula based upon approximately 85% of receivables that meet or satisfy certain criteria (“Eligible Receivables”) and that are subject to a perfected security interest held by either the U.S. Lenders or the International Lender, plus, in the case of the International Revolver only, 10% of Eligible Receivables that are not subject to a perfected security interest held by the International Lender, subject to certain exceptions and restrictions.The Company or the Subsidiary, as applicable, will be required to make mandatory prepayments under their respective Revolving Credit Facilities to the extent that the aggregate outstanding amount thereunder exceeds the then-applicable borrowing base, which payments will be made without penalty or premium. At September 30, 2016, the domestic borrowing base was $30,000,000 and the international borrowing base was €11,765,000 (approximately $13,199,000 at September 30, 2016).U.S. RevolverDomestic Revolving Credit Facility are secured by a first-priority security interest in the above-referenced accounts receivable,Eligible Domestic Receivables, cash proceeds and bank accounts of the Company and certain of the Company’s U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and such subsidiaries. The obligations of the Subsidiary under the International Revolver wouldRevolving Credit Facility are generally be secured by a first-priority security interest in substantially all accounts receivable and cash proceeds thereof, and certain bank accounts of the Subsidiary and certain of the Company’s non-U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.The Revolving Credit Facilities have a term of five years and require payment of interest only during the term. Under the Revolving Credit Facilities, outstanding loans may be repaid in whole or in part at any time, without premium or penalty, subject to certain customary limitations, and will be available to be re-borrowed from time to time through expiration on September 30, 2019.The Company incurred fees and expenses relatedRevolvingmaturity of the Company's previous commercial premium financing arrangement in February 28, 2019 with AFCO Premium Credit Facilities aggregating $3,000,000 which has been deferred. The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest expense and related financing fees, net over a five-year period which ends on September 30, 2019. Unamortized balances of $1,800,000 and $2,250,000 are included in other assets in the consolidated balance sheet at September 30, 2016 and December 31, 2015, respectively.At September 30, 2016LLC ("AFCO"), the Company had $5,006,000 of outstanding letters of credit underentered into a new financing agreement for the U.S. Revolver. Due to the default, the Company was precluded from utilizing any of the $2,494,000 of available borrowing capacity under the U.S. Revolver until the waiver was received on November 1, 2016, at which time the entire amount was available to be borrowed without violating the Consolidated Net Leverage Ratio.At September 30, 2016, the Company had $1,008,000 of outstanding letters of credit and $1,218,000 of available borrowing capacity under the International Revolver and its other foreign credit agreements (See “Other Debt Arrangements” below for more information).Other Debt ArrangementsIn connection with the moverenewal of its corporate headquartersinsurance policies with AFCO for $3,032. The terms of the arrangement include a $258 down payment, followed by monthly payments to Philadelphia, Pennsylvania,be made over an eleven-month period at a 4.57% interest rate through March 31, 2020.Company received a loan from the Philadelphia Industrial Development Corporationbalance payable to AFCO for this arrangement was paid in the amount of $750,000 which bears interest at 2.75%, is repayable in 144 equal monthly installments of $6,121 and matures on May 1, 2027.The Company’s subsidiary, Hill International (Spain) S.A. (“Hill Spain”), maintains a revolving credit facility with six banks (the “Financing Entities”) in Spain which initially provided for total borrowings of up to €5,640,000 with interest at 6.50% on outstanding borrowings.full. At December 31, 2015, total availability under this facility2019, the balance payable of $768 to AFCO was reduced to 50.0% ofreflected in other current liabilities on the initial limit. At September 30, 2016, the total facility was approximately €2,670,000 (approximately $2,996,000) and borrowings outstanding were €2,669,000 (approximately $2,995,000). The amount being financed (“Credit Contracts”) by each Financing Entity is between €189,000 (approximately $213,000) and €769,000 (approximately $863,000). To guarantee Hill Spain’s obligations resulting from the Credit Contracts, Hill Spain provided a guarantee in favor of eachone of the Financing Entities, which, additionally, and solely in the case of unremedied failure to make payment, and at the request of each of the Financing Entities, shall grant a first ranking pledge over a given percentage of corporate shares of Hill International Brasil Participacoes Ltda. for the principal, interest, fees, expenses or any other amount owed by virtue of the Credit Contracts, coinciding with the percentage of credit of each Financing Entity with respect to the total outstanding borrowings under this facility. The facility expires on December 17, 2016 at which time the Company expects to pay off and terminate the facility.Hill Spain also maintains an Instituto de Credito Oficial (“ICO”) loan with Bankia Bank in Spain for €60,000 (approximately $67,000) at September 30, 2016. The availability is reduced by €15,000 on a quarterly basis. At September 30, 2016, total borrowings outstanding were €60,000 (approximately $67,000). The interest rate at September 30, 2016 was 6.50%. The ICO loan expires on August 10, 2017.The Company maintains a credit facility with the National Bank of Abu Dhabi which provides for total borrowings of up to AED 11,500,000 (approximately $3,131,000 at September 30, 2016) collateralized by certain overseas receivables. Borrowings outstanding were AED 11,012,000 (approximately $2,998,000 at September 30, 2016). The interest rate is the one-month Emirate Interbank Offered Rate plus 3.00% (which would be 4.41% at September 30, 2016) but, in any event, no less than 5.50%. This facility also allows for Letters of Guarantee of up to AED 200,000,000 (approximately $54,452,000 at September 30, 2016) of which AED 135,080,000 (approximately $36,777,000) was outstanding at September 30, 2016. The credit facility is subject to periodic review by the bank.Engineering S.A. maintains four unsecured revolving credit facilities with two banks in Brazil aggregating 2,380,000 Brazilian Reais (BRL) (approximately $730,000 at September 30, 2016), with a weighted average interest rate of 5.09% per month at September 30, 2016. There were no borrowings outstanding on any of these facilities which are renewed automatically every three months.The Company also maintains relationships with other foreign banks for the issuance of letters of credit, letters of guarantee and performance bonds in a variety of foreign currencies. At September 30, 2016, the maximum U.S. dollar equivalent of the commitments was $89,237,000 of which $40,362,000 is outstanding.Note 9 — Supplemental Cash Flow InformationThe following table provides additional cash flow information (in thousands):Earnings per ShareBasic earnings per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options using the treasury stock method, if dilutive. Options to purchase 6,480,000 shares and 6,478,000 shares were excluded from the calculation of diluted earnings per common share for the three and nine months ended September 30, 2016, respectively, because they were antidilutive. Dilutive stock options increased the average common shares outstanding by approximately 684,000 shares for the three months ended September 30, 2015 and by approximately 613,000 shares for the nine months ended September 30, 2015. Options to purchase 3,208,000 shares and 3,773,000 shares were excluded from the calculation of diluted earnings per common share for the three and nine months ended September 30, 2015 because they were antidilutive.Note 11 — Share-Based CompensationAt September 30, 2016, the Company had approximately 6,932,000 options outstanding with a weighted average exercise price of $4.10. During the nine months ended September 30, 2016, the Company granted 765,000 options which vest over a five-year period and 10,101 options which vested immediately. The options have a weighted-average exercise price of $4.30 and a weighted average contractual life of 6.97 years. The aggregate fair value of the options was $1,075,000 calculated using the Black-Scholes valuation model. The weighted average assumptions used to calculate fair value were: expected life — 4.97 years; volatility — 57.4% and risk-free interest rate — 1.24%. During the first nine months of 2016, options for approximately 369,000 shares with a weighted average exercise price of $2.62 were exercised, options for approximately 1,104,000 shares with a weighted average exercise price of $6.86 lapsed and options for 82,000 shares with a weighted average exercise price of $4.24 were forfeited.During the nine months ended September 30, 2016, employees purchased approximately 19,000 common shares, for an aggregate purchase price of $65,000, pursuant to the Company’s 2008 Employee Stock Purchase Plan.totaling $581,000of $399 and $899,000$241 for the three months ended September 30, 2016March 31, 2020 and 2015, respectively, and $1,838,000 and $2,360,000 for2019. The Company's related share-based compensation is comprised of the nine months ended September 30, 2016 and 2015, respectively.Note 12 — Stockholders’ EquityThe following table summarizes the changes in stockholders’ equity during the nine months ended September 30, 2016 (in thousands): March 2016, certain officers exercised an aggregate of 297,489 options with an exercise price of $2.45 through the Company on a cashless basis. The Company withheld 215,158 shares as payment for the options and placed those shares in treasury. The officers received a total of 112,331 shares from this transaction.During the nine months ended September 30, 2016, the Company received $220,000 in cash from the exercise of stock options.Note 13 — Income TaxesThe effective tax rates for the three months ended September 30, 2016March 31, 2020 and 2015 were (74.3)%2019, the Company granted certain employees and 55.8%executive officers equity awards in the form of restricted stock units ("RSU") that are subject to a combination of time and performance-based conditions under the 2017 Equity Compensation Plan (the "2017 Plan"), respectively,totaling 723 and 222.8%758 RSUs, respectively. Each RSU entitles the grantee to 1 unit of the Company's common stock. The time-based RSUs vest annually over a three-year period on the anniversary date of each grant. Unvested time-based RSUs will be forfeited if the grantee separates from the Company prior to its vesting date. During the three months ended March 31, 2020 and 47.8%2019, the related compensation expense was recorded based on a weighted average price per share of $3.28 and $3.23, respectively.nineyears ended December 31, 2020, 2021 and 2022 for the RSUs granted during the three months ended September 30, 2016March 31, 2020 and 2015,for the years ended December 31, 2019, 2020 and 2021 for the RSUs granted during three months ended March 31, 2019. If the Company meets the performance metrics for any one of the measurement periods, such units will vest on the next anniversary date of the grant date. All vested RSUs will be settled on the third anniversary of the grant date. Unvested RSUs are subject to forfeiture if the grantee separates from the Company prior to its vesting date. During the three months ended March 31, 2020 and 2019, the Company determined it was not probable that the target performance metric would be met for each of the RSU grants and, therefore, did not record any share-based compensation expense related to such RSUs.Company’sCompany calculates the interim tax expense based on an annual effective tax rate ("AETR"). The AETR represents the Company’s estimated effective tax rate for the year based on projected income and mixfull year projection of incometax expense, divided by the projection of full year pretax book income/(loss) among the various foreign tax jurisdictions, adjusted for discrete transactions occurring during the period. There was no change in the reserve for uncertainThe effective tax positionsrates for the three months ended September 30, 2016March 31, 2020 and 2015. For the nine months ended September 30, 20162019 were (33.3)% and 2015, the Company recognized an income tax (benefit) expense related to an increase(112.5)%, respectively.reserve for uncertainCompany’s effective tax positions amounting to $(14,000) and $245,000, respectively. In addition, the Company recognized an income tax expense (benefit) resulting from adjustments to agree the prior year’s book amounts to the actual amounts per the tax returns totaling $0 and ($37,000)rate for the three months ended September 30, 2016 and 2015, respectively, and $535,000 and ($37,000) forMarch 31, 2020 from the ninethree months ended September 30, 2016 and 2015, respectively. The Company’s effective tax rate in both years is higher than it otherwise would beMarch 31, 2019 was primarily as a result of not recording an income tax benefit relateddue to the U.S. net operating loss and various foreign withholding taxes.The componentsmix of pretax earnings (loss) before income taxes andin jurisdictions with different jurisdictional tax rates, as well as not having the related income tax expense by United States and foreignability to benefit from losses in jurisdictions were as follows (in thousands):$ 939,000$4,582 and $1,220,000$4,615 at September 30, 2016March 31, 2020 and December 31, 2015, respectively, and is included in “Other liabilities” in the consolidated balance sheets at those dates.At both September 30, 2016 and December 31, 2015, potentialThe Company recorded tax related interest and penalties related to uncertain tax positions amounted to $500,000of $3 and was included in$2 for the balance above. or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC740, ASC 740, Income Taxes. They consider both positive and negative evidence.Taxes. In making this determination, management assesses all of theavailable evidence, availableboth positive and negative, at the time includingbalance sheet date. This includes, but is not limited to, recent earnings, internally-prepared income projections, and historical financial performance.14 — Business Segment12 —Segment and Related InformationThe Company’s business segments reflect how executive management makes resource decisions and assesses its performance. bases these decisions onoperates as 1 reporting segment which reflects how the type of services provided (Project Management and Construction Claims) and secondarily by their geography (U.S./Canada, Latin America, Europe, the Middle East, Africa and Asia/Pacific).The Project Management business segmentCompany is managed, which provides extensive construction and project management services to construction owners worldwide. Such services include program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, labor compliance services (collectively, "integrated project management") and facilities management services.The Construction Claims business segment provides such services as claims consulting, management consulting, litigation support, expert witness testimony, cost/damages assessment, delay/disruption analysis, adjudication, lender advisory, risk management, forensic accounting, fraud investigation, Project Neutral and international arbitration services to clients worldwide.The Company evaluates the performance of its segments primarily on operating profit before corporate overhead allocations and income taxes.reflect the required disclosurespresent certain information for the Company’s reportable segments (in thousands): Three Months Ended March 31, 2020 2019 United States $ 46,020 49.3 % $ 48,102 48.7 % Latin America 1,171 1.3 % 2,434 2.5 % Europe 11,537 12.4 % 11,334 11.5 % Middle East 24,572 26.3 % 28,311 28.7 % Africa 7,297 7.8 % 6,949 7.0 % Asia/Pacific 2,711 2.9 % 1,553 1.6 % Total $ 93,308 100.0 % $ 98,683 100.0 % (“CFR”)Total Revenue Three Months Ended March 31, 2020 2019 United States $ 34,044 44.2 % $ 32,595 41.2 % Latin America 1,171 1.5 % 2,429 3.1 % Europe 10,581 13.7 % 10,902 13.8 % Middle East 23,413 30.3 % 25,260 32.0 % Africa 6,602 8.6 % 6,411 8.1 % Asia/Pacific 1,339 1.7 % 1,403 1.8 % Total $ 77,150 100.0 % $ 79,000 100.0 % Three Months Ended
March 31, 2020 2019 $ 7,388 $ 5,742 Latin America (243 ) 277 1,697 882 1,098 5,119 Africa 863 1,610 Asia/Pacific 183 (478 ) (14,851 ) (12,613 ) Total $ (3,865 ) $ 539 Consulting Fee Revenue by Geographic Region:During the third quarter ended September 30, 2016, consulting fee revenue Three Months Ended
March 31, 2020 2019 Project Management $ 364 $ 774 2,060 17 Total $ 2,424 $ 791 United Arab Emirates amountedwrite-off of leasehold improvements related to $25,016,000 representing 16.9% of the total. No other country other than the United States accounted for 10% or more of consolidated consulting fee revenue.During theCompany subletting office space in Philadelphia to a third quarter ended September 30, 2015, consulting fee revenue for the United Arab Emirates amounted to $29,642,000 representing 18.7% of the total. No other country other than the United States accounted for 10% or more of consolidated consulting fee revenue.Total Revenue by Geographic Region:During the third quarter ended September 30, 2016, total revenue for the United Arab Emirates amounted to $26,359,000 representing 15.7% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.During the third quarter ended September 30, 2015, total revenue for the United Arab Emirates amounted to $30,910,000 representing 17.3% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.Consulting Fee Revenue By Client Type: Three Months Ended March 31, 2020 2019 U.S. federal government $ 4,610 4.9 % $ 4,692 4.8 % U.S. state, regional and local governments 30,551 32.7 % 30,895 31.3 % Foreign governments 25,364 27.2 % 25,679 26.0 % Private sector 32,783 35.2 % 37,417 37.9 % Total $ 93,308 100.0 % $ 98,683 100.0 % March 31, 2020 December 31, 2019 United States $ 8,188 $ 9,701 Latin America 525 700 Europe 447 473 Middle East 809 803 Africa 131 139 Asia/Pacific 67 79 Total $ 10,167 $ 11,895 Consulting Fee Revenue (“CFR”)Total RevenueOperating Profit (Loss) by Geographic Region:Depreciation and Amortization Expense:Consulting Fee Revenue by Geographic Region:During the nine months ended September 30, 2016, consulting fee revenue for the United Arab Emirates amounted to $86,596,000 representing 18.9% of the total. No other country except the United States accounted for 10% or more of consolidated consulting fee revenue.During the nine months ended September 30, 2015, consulting fee revenue for the United Arab Emirates amounted to $83,613,000 representing 17.8% of the total. No other country except the United States accounted for 10% or more of consolidated consulting fee revenue.Total Revenue by Geographic Region:During the nine months ended September 30, 2016, total revenue for the United Arab Emirates amounted to $91,082,000 representing 17.5% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.During the nine months ended September 30, 2015, total revenue for the United Arab Emirates amounted to $85,898,000 representing 16.2% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.Consulting Fee Revenue By Client Type:Total Revenue By Client Type:1513 — Commitments and ContingenciesGeneral Litigationactionsproceedings which arise in the normal course of business. As such the Company is required to assess the likelihood of any adverse outcomes to these mattersproceedings as well as potential ranges of probable losses. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter.proceeding. The provision may change in the future due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made. It is the opinion of management, after consultation with legal counsel, that the ultimate resolution of these mattersproceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.Acquisition-Related ContingenciesAs of September 30, 2016, our subsidiary, Hill International (Spain), S.A.Hill Spain”), owned an indirect 91% interest in Engineering S.A. (“ESA”Knowles”), a firmsubsidiary of the Company, is a party to an arbitration proceeding instituted on July 8, 2014 in which Knowles claimed that it was entitled to payment for services rendered to Celtic Bioenergy Limited (“Celtic”). The arbitrator decided in favor of Knowles. The arbitrator’s award was appealed by Celtic to the U.K. High Court of Justice, Queen’s Bench Division, Technology and Construction Court (“Court”). On March 16, 2017, the Court (1) determined that certain relevant facts had been deliberately withheld from the arbitrator by an employee of Knowles and (2) remitted the challenged parts of the arbitrator’s award back to the arbitrator to consider the award in possession of the full facts. In May 2019, Celtic issued a claim against Knowles for negligent application and a hearing was held in December 2019. The Company is awaiting a final determination.Brazil. ESA’s shareholders entered intoKuwait. FAB subsequently issued, on behalf of the Company, a payment on February 15, 2018. The Company is taking legal action to recover the full Performance Guarantee amount. On September 20, 2018 the Kuwait First Instance Court dismissed the Company's case. As a result, the Company fully reserved the performance guarantee payment above in the first quarter of 2018 and it is presented as "Loss on Performance Bond" on the consolidated statements of operations. The Company filed an agreement wherebyappeal before the minority shareholders haveKuwait Court of Appeals seeking referral of the matter to a rightpanel of experts for determination. On April 21, 2019, the Court of Appeals ruled to compel (“ESA Put Option”) Hill Spainrefer the matter to purchase any orthe Kuwait Experts Department. Hearings with the Kuwait Experts Department were held during July and September 2019. A final report was issued by the panel of experts in October 2019 for the held hearings on January 7, 2020 and February 4, 2020 and reserved the case for judgment to be issued on April 21, 2020. Due to the COVID-19 pandemic, all courts in Kuwait are closed until May 31, 2020. The Kuwait Court of Appeals will determine a new date for the judgment to be issued after the courts reopen.shares duringhome country, in which their employees provided services. The Company has estimated the period from February 28, 2014 to February 28, 2021. Hill Spain also has the right to compel (“ESA Call Option”) the minority shareholders to sell any or all of their shares during the same time period. The purchase price for such shares shall be seven times the earnings before interest and taxes for ESA’s most recently ended fiscal year, net of any financial debt plus excess cash multiplied by a percentage which the sharespotential liability to be purchased bear to the total number of shares outstanding at the time of purchase, but in the event the ESA Call Option is exercised by Hill Spain, the purchase price shall be increased by five percent. The ESA Put Option and the ESA Call Option must be made within three months after the audited financial statements of ESA have been completed. On June 17, 2016, the three remaining minority shareholders exercised their ESA Put Option claiming a value of BRL 8,656,000 (approximately $2,655,000 at September 30, 2016). The Company accrued the liabilityapproximately $1,196, which is included in other current liabilities and as an adjustment to additional paid-in capital in the consolidated balance sheet at September 30, 2016. The amount is subject to negotiation and any difference will be recorded upon completion of the transaction.On October 31, 2014, our subsidiary Hill International (UK) Ltd. acquired all of the outstanding common stock of Angus Octan Scotland Ltd., which included its subsidiary companies Cadogan Consultants Ltd., Cadogan Consult Ltd. and Cadogan International Ltd. (collectively, “Cadogans”). The sellers of Cadogans are entitled to an earn-out based upon theaverage earnings before interest, taxes, depreciation and amortization for the two-year period ending on October 31, 2016 (which amount shall not be less than £0 or more than £200,000). The Company accrued the potential additional consideration of £200,000 ($259,000) which is included in other current liabilities in the consolidated balance sheet at September 30, 2016.TwoMarch 31, 2020.selling shareholdersCompany's operating leases include one or more options to renew at the Company's sole discretion. The lease renewal option terms generally range from 1 month to 5 years for office leases. The determination of Cadogans may receive an earn-out in annual installments of upwhether to £100,000 ($130,000)include any renewal options is made by the Company at September 30, 2016), which will be charged to earnings, provided that Cadogans’ EBITDA for eachlease inception when establishing the term of the years ending Octoberlease. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheet as of March 31, 2016, 2017, 20182020.2019 is greater than £396,000 ($513,000). Based upon preliminary results, it appears that the two shareholders will receive an earnout amounting to £100,000 ($130,000) of which £92,000 ($120,000) has been accrued and charged to earnings$1,986 for the three and nine months ended September 30, 2016.In connection with the acquisition of IMS Proje Yonetimi ve Danismanlik A.S. (“IMS”) on April 15, 2015, the Company had accrued approximately TRY 1,700,000 for a potential earn out which would be payable if earnings before interest, income taxes, depreciationMarch 31, 2020 and amortization for the twelve month period subsequent to the closing date (“EBITDA”) exceeded TRY 3,500,000. A lesser amount would have been payable if EBITDA was between TRY 3,200,000 and TRY 3,500,000. IMS’s EBITDA through the one-year anniversary of the acquisition date was not sufficient to earn any of the Additional Purchase Price and the liability was eliminated by a credit of approximately $673,000 to2019, respectively, is included in selling, general and administrative and direct expenses in the consolidated statements of operations. Total rent expense for the nine month periodthree months ended September 30, 2016. Total Operating Lease Payments 2020 (excluding the three months ended March 31, 2020) $ 6,628 2021 4,999 2022 4,089 2023 3,321 2024 2,436 Thereafter 4,440 25,913 Less amount representing imputed interest 4,205 Present value of lease obligations $ 21,708 Weighted average remaining lease term (years) 5.00 Weighted average discount rate 6.97 % Operations.Operations (dollars in thousands).(“CFR”("CFR") and reimbursable expenses. Reimbursable expensesThe professionals we deploy are reflected in equaloccasionally subcontractors. We generally bill the actual cost of these subcontractors and recognize this cost as both revenue (reimbursable expenses) and direct expense. CFR refers to our revenue excluding amounts in bothpaid or due to subcontractors. We believe CFR is an important measure because it represents the revenue on which we earn gross profit, whereas total revenue includes subcontractors on which we generally pass through the cost and total direct expenses. Because these pass-through revenue/earn minimal or no gross profit.subject to significant fluctuation from year to year, we measure the performance of many of our key operating metricsnot billable and corporate or regional costs such as sales, business development, proposals, operations, finance, human resources, legal, marketing, management and administration.percentage of CFR,single reporting segment, known as we believe that this is a better and more consistent measure of operating performance than total revenue.The recent drop in global oil prices has had a negative impact on the construction industry, particularly in the Middle East, where existing projects have been suspended or have had scope reductions. Also, political upheaval and civil unrest have negatively affected business in the region. This trend could continue for the next few years.CFR decreased $10,586,000, or 6.7%, to $147,993,000 during the third quarter of 2016 from $158,579,000 during the third quarter of 2015. CFR for the Project Management segment decreased $9,673,000 principally dueGroup which provides fee-based construction management services to decreasesour clients, leveraging our construction expertise to identify potential trouble, difficulties and sources of delay on a construction project before they develop into costly problems. Our experienced professionals are capable of managing all phases of the construction process from concept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers.Middle East,regions where three large projects were completed and several existing projectsthey deliver their services, so the travel restrictions that have been suspendedenacted by various government authorities are not expected to impair their ability to continue to perform services for our clients.haveremotely at the same or at a slightly reduced volume as in effect prior to the spread of COVID-19.scope reductions,company laptop computers and Latin America, partially offset by increasesthe ability to work remotely prior to the institution of our work-at-home policy. The work-at-home policy has not had a significant impact on our employees’ ability to perform their job requirements. Our internal control structure does not generally require physical access to our office locations, and has not to date and is not expected in the United States. CFR forfuture to be adversely impacted by the Construction Claims segment decreasedspread of COVID-19 and the corresponding response by $913,000, or 2.2%, due primarilycertain governmental authorities. Processes that require physical access to decreases in Europeour offices, such as receiving mail (including collections) and Asia/Pacific, partially offsetprocessing and mailing manual checks, are being performed by increasesdesignated individuals at a reduced frequency.Middle East.CFR decreased $11,546,000, or 2.5%, to $457,912,000 during the nine months ended September 30, 2016 from $469,458,000 during the nine months ended September 30, 2015. CFR for the Project Management segment decreased $11,549,000 principally due to decreasesprocurement processes of a number of our current and potential clients and a temporary slowing of collections. We expect these delays in the Middle East, as noted above, and Latin America, partially offset by increasesprocurement process to adversely impact the timing of our new bookings, resulting in the United States. CFR for the Construction Claims segment was essentially flat due primarily to increases in the United Kingdom and the Middle East, offset by decreases in the United States.Net loss attributable to Hill was ($6,866,000) during the third quarter of 2016 compared to net earnings of $2,948,000 during the third quarter of 2015. The decrease was due to a lower volume of work and declining margins in the Middle East as well as increased operating expenses.Diluted loss per common share was ($0.13) during the third quarter of 2016 based upon 51,753,000 diluted common shares outstanding compared to diluted earnings per common share of $0.06 during the third quarter of 2015 based upon 51,803,000 diluted common shares outstanding.Net loss attributable to Hill was ($3,926,000) during the nine months ended September 30, 2016 compared to net earnings of $8,045,000 during the nine months ended September 30, 2015. The decrease was due to a lower volume of work and declining margins in the Middle East as well as increased operating expenses.Diluted loss per common share was ($0.08) during the nine months ended September 30, 2016 based upon 51,704,000 diluted common shares outstanding compared to diluted earnings per common share of $0.16 during the nine months ended September 30, 2015 based upon 51,274,000 diluted common shares outstanding.Critical Accounting PoliciesThe Company’s interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgment increases such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in the Company’s 2015 Annual Report.Results of OperationsThree Months Ended September 30, 2016 Compared toThree Months Ended September 30, 2015(“CFR”("CFR") (dollarsand backlog for the duration of the economic slowdown caused by the pandemic.thousands)decreasefull extent and duration of the impact of COVID-19 on our operations and financial performance is currently unknown, and depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets on a macro-scale and any new information that may emerge concerning the severity of the virus, its spread to other regions and the actions to contain the virus or treat its impact, among others.CFRthe financial statements for the three-month period ended March 31, 2020 was primarily due to the effects of the COVID-19 pandemic. The potential additional future impacts to our consolidated financial statements of operations include, but are not limited to: decreased work inCFR, lower gross and operating margins, impairment of goodwill and indefinite-lived intangible assets and fair value and collectability of receivables.Middle East wherebusiness and mitigate the recent drop in oil prices has had a negative effect on funding for construction projects, some of which have been suspended or have had scope reductions. Also, political upheaval and civil unrest has generally had a negative effect on business in the region. This trend could continuerisks associated with COVID-19 for the next few years. Three Months Ended March 31, Change 2020 2019 $ % Income Statement Data: Consulting fee revenue $ 77,150 $ 79,000 $ (1,850 ) (2.3 )% Reimbursable expenses 16,158 19,683 (3,525 ) (17.9 )% Total revenue $ 93,308 $ 98,683 $ (5,375 ) (5.4 )% Direct expenses 65,048 67,247 (2,199 ) (3.3 )% Gross profit $ 28,260 $ 31,436 $ (3,176 ) (10.1 )% Selling, general and administrative expenses 32,149 31,311 838 2.7 % Plus: Share of profit of equity method affiliates 24 414 (390 ) (94.2 )% Operating (loss) profit $ (3,865 ) $ 539 $ (4,404 ) (817.1 )% Interest and related financing fees, net 1,299 1,512 (213 ) (14.1 )% Other income, net 345 — 345 100.0 % Loss before income taxes $ (4,819 ) $ (973 ) $ (3,846 ) 395.3 % Income tax expense 1,603 1,095 508 46.4 % Net loss $ (6,422 ) $ (2,068 ) $ (4,354 ) 210.5 % Less: net earnings - non-controlling interests 159 67 92 137.3 % Net loss attributable to Hill International, Inc. $ (6,581 ) $ (2,135 ) $ (4,446 ) 208.2 % Three Months Ended March 31, Change 2020 2019 $ % United States $ 46,020 49.3 % $ 48,102 48.7 % $ (2,082 ) (4.3 )% Latin America 1,171 1.3 % 2,434 2.5 % (1,263 ) (51.9 )% Europe 11,537 12.4 % 11,334 11.5 % 203 1.8 % Middle East 24,572 26.3 % 28,311 28.7 % (3,739 ) (13.2 )% Africa 7,297 7.8 % 6,949 7.0 % 348 5.0 % Asia/Pacific 2,711 2.9 % 1,553 1.6 % 1,158 74.6 % Total $ 93,308 100.0 % $ 98,683 100.0 % $ (5,375 ) (5.4 )% Three Months Ended March 31, Change 2020 2019 $ % United States $ 34,044 44.2 % $ 32,595 41.2 % $ 1,449 4.4 % Latin America 1,171 1.5 % 2,429 3.1 % (1,258 ) (51.8 )% Europe 10,581 13.7 % 10,902 13.8 % (321 ) (2.9 )% Middle East 23,413 30.3 % 25,260 32.0 % (1,847 ) (7.3 )% Africa 6,602 8.6 % 6,411 8.1 % 191 3.0 % Asia/Pacific 1,339 1.7 % 1,403 1.8 % (64 ) (4.6 )% Total $ 77,150 100.0 % $ 79,000 100.0 % $ (1,850 ) (2.3 )% Project Management CFR included a $13,880,000total revenue and the corresponding decrease in international projects and an increase of $4,207,000CFR for the three months ended March 31, 2020 compared to the same period in domestic projects. The decrease in international Project Management CFR was due primarily to decreases throughout the Middle East and Brazil. The increase in domestic Project Management CFR included increases primarily in the Northeast and Southern Regions.The decrease in Construction Claims CFR2019 was primarily due to decreasesthe demobilization of a major project in the United Kingdom, the United States and Asia/Pacific, partially offset by increases in the Middle East.Reimbursable Expenses (dollars in thousands)Reimbursable expenses consist of amounts paid to subcontractors andOman along with other third parties, and travel and other job-related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of earnings. The decrease in Construction Claims reimbursable expense is primarily due to lower direct job related expenses in the United Kingdom and the Middle East.Cost of Services (dollars in thousands)
CFR
CFRCost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job-related travel and out-of-pocket expenses. The decrease in Project Management cost of services is primarily due to decreases in the Middle East due to staffing reductions in line with lower CFR, partially offset by increases in the United States in support of increased work. The decrease in the Construction Claims cost of services is primarily due to decreased direct labor in the United Kingdom and the United States in line with lower CFR.Gross Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management gross profit included a decrease of $3,931,000 from international operations, primarily as a result of reduced contractual rates and a lower volume of work in the Middle East and a volume decrease in Latin America. This was partially offset by an increase of $1,392,000 in domestic operations primarily the Northeast and Southern regions.The Construction Claims gross profit was essentially flat with increasesdemobilizations in the Middle East, partially offset by decreasesnew work on a major project in Qatar and new work in the United Kingdom and Asia/Pacific.Selling, General and Administrative (“SG&A”) Expenses (dollarsStates, primarily in thousands) Three Months Ended March 31, Change 2020 2019 $ % United States $ 13,854 49.0 % 40.7 % $ 13,326 42.4 % 40.9 % $ 528 4.0 % Latin America 423 1.5 % 36.1 % 874 2.8 % 36.0 % (451 ) (51.6 )% Europe 3,961 14.0 % 37.4 % 4,259 13.5 % 39.1 % (298 ) (7.0 )% Middle East 6,634 23.5 % 28.3 % 9,497 30.2 % 37.6 % (2,863 ) (30.1 )% Africa 2,790 9.9 % 42.3 % 2,859 9.1 % 44.6 % (69 ) (2.4 )% Asia/Pacific 599 2.1 % 44.7 % 621 2.0 % 44.3 % (22 ) (3.5 )% Total $ 28,261 100.0 % 36.6 % $ 31,436 100.0 % 39.8 % $ (3,175 ) (10.1 )% selling, generalnon-reimbursable costs of sub-contractors on a project for the European Investment Bank and administrativeincreased direct expenses includedin Spain.following:· An increaseregion is primarily due to work on a large project in Qatar which started during the second half of $7,983,0002019 with lower than average margin.primarily for increased reserves for certain accounts receivableas a result of improved collection during 2020 and reclassification in the Middle East2020 of a prior bad debt provision to a reduction in revenue, an approximate $940 decrease in audit related fees due to a more efficient audit in 2020, and Asia/Pacific;· A increasean approximate $1,400 decrease in legal fees of $2,567,000 dueexpenses in 2020 primarily to costs related to the proxy contest; and· A decrease in amortization expense of $566,000 as certain acquired intangible assets have become fully amortized.Operating Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management operating profit was primarily due to the increase of $7,197,000 in bad debt reserves due to delays in payments or short pays against accounts receivable coupled with a decline in CFR in the Middle East, largely in Oman, the United Arab Emirates, Qatar and Iraq.The decrease in Construction Claims operating profit was primarily due to CFR decreases in the United Kingdom and Asia/Pacific, partially offset by increases in the Middle East and higher bad debt expense of $786,000.Corporate expenses increased by $2,236,000 which was primarily due to increases in legal fees associated with the proxy contest. Corporate expenses represented 7.1% of CFR during the third quarter ended September 30, 2016 compared to 5.2% during the third quarter ended September 30, 2015.Interest Expense and Related Financing Fees, netNet interest and related financing fees decreased $779,000 to $3,368,000 in the three months ended September 30, 2016 as compared with $4,147,000 in the three months ended September 30, 2015. The decrease was primarily due to interest of $607,000 paid to a subcontractor in 2015 as a result of a settlement of previously incurred legal settlement.Income TaxesFor the three months ended September 30, 2016expenses. In addition, 2019 had retention bonus expenses of approximately $630 which did not recur in 2020.2015, the Company recognized income tax expense of $2,880,000Related Financing Fees, net$4,210,000, respectively. The income tax expense in both periods was related to the pre-tax income generated from foreign operations adjusted for discrete items during the period and without recognizing an income tax benefit related to the U.S.financing fees, net operating loss which management believes the Company will not be able to utilize. For the three months ended September 30, 2016, there was no change in the reserve for uncertain tax positions. The Company recognized anamount of $1,299 is net of $46 of interest income, tax benefit for the three months ended September 30, 2015March 31, 2020 compared with Interest and related financing fees, net in the amount of $37,000 resulting from adjustments to agree the prior year book amount to the actual amounts per the tax return.The effective$1,512, is net of $133 of interest income, tax rates for the three months ended September 30, 2016 and 2015 were (74.3%) and 55.8%, respectively. For both years, the Company’s effective tax rate is significantly higher than it otherwise would be primarily as a result of various foreign withholding taxes and not being able to record an income tax benefit related to the U.S. net operating loss.Net (Loss) Earnings Attributable to Hill International, Inc.Net loss attributable to Hill International, Inc. for the three months ended September 30, 2016 was ($6,866,000), or ($0.13) per diluted common share, based on 51,753,000 diluted common shares outstanding, asMarch 31, 2019. The three months ended March 31, 2020 included lower interest expense primarily related to our U.S. dollar-denominated revolving credit facility and term loan with Société Générale (the “Agent”) and other U.S. Loan Parties (the “U.S. Lenders”) due to a lower weighted-average interest rate throughout the three months ended March 31, 2020, when compared to the three months ended March 31, 2019. earningsSeptember 30, 2015 of $2,948,000, or $0.06 per diluted common share, based upon 51,803,000 diluted common shares outstanding.Nine Months Ended September 30, 2016 Compared toNine Months Ended September 30, 2015Consulting Fee Revenue (“CFR”) (dollarsMarch 31, 2020 and 2019 were (33.3)% and (112.5)%, respectively. The change in thousands)The decrease in CFR included an organic decrease of 2.8% primarily in the Middle East and Latin America, partially offset by an increase of 0.3% due to the acquisition of IMS Proje Yonetimi ve Danismanlik A.S. (“IMS”) in April 2015. The recent drop in oil prices, as well as ongoing political upheaval and civil unrest, has had a negative effect on business, particularly the construction industry, in the Middle East where construction projects have been suspended or have had scope reductions. This trend could continueour effective tax rate for the next few years.The decrease in Project Management CFR included an organic decrease of 3.8%, partially offset by an increase of 0.5% due to the acquisition of IMS. The decrease included a $21,551,000 decrease in international projects, partially offset by an increase of $10,002,000 in domestic projects. The decrease in international Project Management CFR was due primarily to decreases in the Middle East and Latin America. The increase in domestic CFR occurred throughout the United States.Construction Claims CFR was essentially flat with increases in the Middle East, Europe and Australia offset by decreases in the United States and Latin America.Reimbursable Expenses (dollars in thousands)Reimbursable expenses consist of amounts paid to subcontractors and other third parties, and travel and other job-related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of operations. The increase in Project Management reimbursable expense is primarily due to higher use of subcontractors in our Mid-Atlantic region, partially offset by a decrease in subcontractors in the Northeast region. The decrease in Construction Claims reimbursable expense is primarily due to decreases in the United Kingdom and the Middle East.Cost of Services (dollars in thousands)
CFR
CFRCost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job-related travel and out-of-pocket expenses. The decrease in Project Management cost of services is primarily due to decreases in the Middle East direct labor due to lower CFR, partially offset by increased direct labor in the United States supporting increased CFR.Gross Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management gross profit included decreases throughout the Middle East and Latin America partially offset by increases in the United States.Construction Claims gross profit, which was essentially flat compared to last year, included increases in the United Kingdom and the Middle East, partially offset by decreases in the United States and Asia/Pacific.The overall gross profit percentage decreased due to lower margins achieved in the Middle East, primarily Oman and Qatar.Selling, General and Administrative (“SG&A”) Expenses (dollars in thousands)The increase in selling general and administrative expenses was primarily due to the following:· An increase of $9,338,000 in bad debt expense primarily for increased reserves for certain accounts receivable in the Middle East and Asia/Pacific;· An increase in legal fees of $1,236,000 due primarily to higher legal costs incurred in 2016 compared to 2015 in connection with the proxy contests in both years partially offset by an employee labor dispute amounting to $1,048,000 in 2015;· A decrease in unapplied and indirect labor of $1,362,000 due to staff reductions in late 2015 and early 2016 due to decreased CFR;· A decrease of $1,159,000 in amortization expense as certain acquired intangible assets have become fully amortized; and· A credit for a previously accrued earn-out liability of $673,000 related to the IMS acquisition which was not earned as of the twelve month measurement date.Operating Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management operating profit was due primarily to the increase of $9,061,000 of bad debts expense primarily in the Middle East coupled with a decline in CFR throughout the Middle East partially offset by an increase in the United States.The decrease in Construction Claims operating profit was primarily due to CFR decreases in the United Kingdom, Asia/Pacific and the United States and to higher bad debt expense of $277,000Corporate expenses increased by $1,088,000 primarily due to legal fees associated with the proxy contest. Corporate expenses represented 6.1% of CFR during the ninethree months ended September 30, 2016 compared to 5.7% during the nine months ended September 30, 2015.Interest Expense and Related Financing Fees, netInterest and related financing fees decreased $1,149,000 to $10,103,000 during the nine months ended September 30, 2016 compared to $11,252,000 during the nine months ended September 30, 2015March 31, 2020 was primarily due to interest of $607,000 paid to a subcontractor in 2015 as a result of a legal settlement.Income TaxesFor the nine months ended September 30, 2016 and 2015, the Company recognized anmix of income among various jurisdictions with different statutory tax expense of $6,939,000 and $7,980,000, respectively. The income tax expense in both periods was related to the pre-tax income generated from foreign operations adjusted for discrete items during the period and without recognizing an income tax benefit related to the U.S. net operating loss which management believes the Company will not be able to utilize. For the nine months ended September 30, 2016 and 2015, the Company recognized an income tax (benefit) expense related to an increase in the reserve for uncertain tax positions totaling $(14,000) and $245,000, respectively, primarily due to tax positions taken in foreign jurisdictions. The Company also recognized an income tax expense (benefit) resulting from adjustments to agree the prior year’s book amounts to the actual amounts per the tax returns totaling $535,000 and $(37,000) in the nine months ended September 30, 2016 and 2015, respectively.The effective income tax rates for the nine months ended September 30, 2016 and 2015 were 222.8% and 47.8%, respectively. For both years, the Company’s effective tax rate is significantly higher than it otherwise would be primarily as a result of various foreign withholding taxes and not being able to record an income tax benefit related to the U.S. net operating loss.Net (Loss) Earnings Attributable to Hill International, Inc.Net loss attributable to Hill International, Inc. for the nine months ended September 30, 2016 was ($3,926,000), or ($0.08) per diluted common share, based upon 51,704,000 diluted common shares outstanding, as compared to net earnings for the nine months ended September 30, 2015 of $8,045,000, or $0.16 per diluted common share, based upon 51,274,000 diluted common shares outstanding.Non-GAAP Financial MeasuresEBITDA, a non-GAAP performance measure used by management, is defined as net earnings plus interest expense, income tax expense and depreciation and amortization, as shown in the table below. EBITDA does not purport to be an alternative to net earnings as a measure of financial and operating performance or ability to generate cash flows from operations that are available for taxes and capital expenditures. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such asinterest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.Using EBITDA as a performance measure has material limitations as compared to net earnings, or other financial measures as defined under U.S. GAAP as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense; however, as we have borrowed money in order to finance transactions and operations, interest expense is an element of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense, depreciation and amortization and income taxes has material limitations as compared to net earnings. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA and net earnings in each period, so as to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net earnings to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our stockholders.A reconciliation of EBITDA to the most directly comparable GAAP measure follows (in thousands):
September 30,
September 30,At September 30, 2016,sources of liquidity consisted of $21,219,000source of cash is receipts from clients. We generally pay our employees semi-monthly in arrears and invoice our clients monthly in arrears. Our clients generally remit payment approximately three months, on average, after invoice date. This creates a lag between the time we pay our employees and the time we receive payment from our clients. We bill our clients for any subcontractors used and pay those subcontractors after receiving payment from our clients, so no such timing lag exists for the payments we make to subcontractors.equivalents, of which $19,337,000 was on deposit in foreign locations, hand and $1,218,000 of available borrowing capacity under our various credit facilities. At September 30, 2016, we were in default of our Consolidated Net Leverage Ratio. On November 1, 2016, we received a waiver of the default from the Agent. Afterwards, we had $2,494,000 of available borrowing capacity under our domestic credit agreement, all of which is available to be borrowed without violating the Consolidated Net Leverage Ratio covenant. See Note 8 to our consolidated financial statements for a description of ourrevolving credit facilities to fund the working capital requirement caused by the lag discussed above and term loan.other operating needs. We believe that we haveour expected cash receipts from clients, together with current cash on hand and revolving credit facilities, are sufficient liquidity to support the reasonably anticipated cash needs of our operations over the next twelve months. However, significant unforeseen events, such as termination or cancellationmonths from May 7, 2020, the date of major contracts or further delays in receivable collections, could adversely affectthis report.results of operations. If market opportunities exist, we may choose to undertake financing actions to further enhance our liquidity, which could include borrowing additional funds under our credit agreements, obtaining new bank debt, raising funds through capital market transactions, or other strategic initiatives. See “Sources of Additional Capital” for further information.In 2012, we commenced operations on the Oman Airport project with the Ministry of Transportation and Communications (“MOTC”). The original contract term was to expire in November 2014. In October 2014, we applied for a twelve-month extension of time amendment (“first extension”) (which was subsequently approved in March 2016) and we continued to work on the Oman Airport project. We began to experience some delays in payment during the second quarter of 2015 when MOTC commenced its formal review and certification of our invoices. In December 2015, we began discussions with the MOTC on a second extension of time amendment and have since commenced additional work, which we expect to last approximately 18 months. When the MOTC resumed payments in 2016, we received approximately $15,000,000 in March, approximately $1,800,000 in April, approximately $14,100,000 in June, approximately $3,200,000 in Octoberand approximately $7,900,000 in November. At September 30, 2016, accounts receivable from Oman totaled approximately $29,500,000. After receipt of the October and November payments, approximately $7,900,000 was past due based on contractual terms. Although MOTC has not made payments under the contractual terms of the first extension and second extension amendments, we have received full payment under the first extension and believe that the same will hold true for the second extension as there is no evidence to the contrary. In fact, there are multiple indicators that we will receive payment: Oman is a wealthy, stable and solvent country which recently raised funds in the capital markets to help finance its 2016 budget, the MOTC has certified the past due invoices, MOTC is committed to paying its obligations to us including consideration of a payment plan, and we have received significant payments totaling $11,100,000 during the past two months and a total of approximately $42,000,000 in 2016.The amount of CFR attributable to operations in the Middle East and Africa has grown from approximately 32% in 2011 to approximately 49% of total consolidated CFR in the first nine months of 2016. We have recently experienced a slowdown in collections from our clients in the Middle East primarily due to the recent drop in oil prices. This has put a considerable strain on our liquidity. As a result, we have had to rely heavily on debt and equity transactions to fund our operations and we may continue our reliance on debt and equity transactions for our liquidity needs over the next 18 months.Additional Capital RequirementsOur subsidiary, Hill International (Spain), S.A. (“Hill Spain”), owns an indirect 91% interest in Engineering S.A. (“ESA”), a firm located in Brazil. ESA’s shareholders entered into an agreement whereby the minority shareholders have a right to compel (“ESA Put Option”) Hill Spain to purchase any or all of their shares during the period from February 28, 2014 to February 28, 2021. Hill Spain also has the right to compel (“ESA Call Option”) the minority shareholders to sell any or all of their shares during the same time period. The purchase price for such shares shall be seven times the earnings before interest and taxes for ESA’s most recently ended fiscal year, net of any financial debt plus excess cash multiplied by a percentage which the shares to be purchased bear to the total number of shares outstanding at the time of purchase, but in the event the ESA Call Option is exercised by Hill Spain, the purchase price shall be increased by five percent. The ESA Put Option and the ESA Call Option must be made within three months after the audited financial statements of ESA have been completed. On June 17, 2016, the three remaining minority shareholders exercised their ESA Put Option with a value of BRL 8,656,000 (approximately $2,655,000 at September 30, 2016). This amount is subject to negotiation with the three minority shareholders.Hill Spain also maintains a revolving credit facility with six banks. At September 30, 2016, outstanding borrowings were approximately $2,995,000. The facility expires on December 17, 2016 and will be paid off and terminated.On October 31, 2014, our subsidiary Hill International (UK) Ltd. acquired all of the outstanding common stock of Angus Octan Scotland Ltd., which included its subsidiary companies Cadogan Consultants Ltd., Cadogan Consult Ltd. and Cadogan International Ltd. (collectively, “Cadogans”). The sellers of Cadogans are entitled to an earn out of £200,000 based upon Cadogans’ average earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the two-year period ending on October 31, 2016. Based on preliminary information, it appears that EBITDA is sufficient to earn the £200,000 ($259,000).Two of the selling shareholders of Cadogans may receive an earn-out in annual installments of up to £100,000 ($130,000) at September 30, 2016), which will be charged to earnings, provided that Cadogans’ EBITDA for each of the years ending October 31, 2016, 2017, 2018 and 2019 is greater than £396,000 ($513,000). Based upon preliminary results, it appears that the two shareholders will receive an earnout amounting to £100,000 ($130,000)equivalents, of which £92,000 ($120,000) has been accrued$14,564 was on deposit in foreign locations, and charged to earnings for the three and nine months ended September 30, 2016.Sources of Additional CapitalWe have an effective registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (the “SEC”) to register 20,000,000 shares of our common stock for issuance and sale by us at various times in the future. To date, we have issued 9,546,629 shares, leaving a balance of 10,453,371 shares. The proceeds, if any, will be used for working capital and general corporate purposes, subject to the restrictions of our Secured Credit Facility. We cannotpredict the amount of proceeds from those future sales, if any, or whether there will be a market for our common stock at the time of any such offering or offerings to the public.In addition, we have an effective registration statement on Form S-4 on file with the SEC to register 20,000,000 shares of our common stock for issuance in connection with business acquisitions. To date, we have issued 1,073,196 shares under this registration statement, leaving a balance of 18,926,804 shares. We cannot predict whether, in the future, we will offer these shares to potential sellers of businesses or assets we might consider acquiring or whether these shares will be acceptable as consideration by any potential sellers.At September 30, 2016, we had $1,218,000$2,799 of available borrowing capacity under our various foreign credit agreements. On September 30, 2016, we were in default of our Consolidated Net Leverage Ratio covenant. On November 1, 2016, we received a waiver of the default from the Agent. Afterwards, we had $2,494,000 of available borrowing capacity under our domestic credit agreement, all of which is available to be borrowed without violating the Consolidated Net Leverage Ratio covenant.September 30, 2016,March 31, 2020, we had approximately $48,875,000$58,076 of availability under these arrangements.We Our sources of liquidity under arrangements with foreign banks are available for repatriation as deemed necessary by us, with some restrictions and tax implications.Flow Activity Flows Three Months Ended March 31, 2020 Change 2019 Net cash (used in) provided by operating activities $ (10,932 ) $ (19,390 ) $ 8,458 Net cash used in investing activities (833 ) 40 (873 ) Net cash provided by financing activities 10,789 9,829 960 Effect of exchange rate changes on cash, cash equivalents and restricted cash (513 ) 520 (1,033 ) Net (decrease) increase in cash, cash equivalents and restricted cash $ (1,489 ) $ 7,512 Nine Months Ended September 30, 2016For the ninethree months ended September 30, 2016, our cash and cash equivalents decreased by $2,870,000 to $21,219,000. Cash used in operations was $5,329,000, cash used in investing activities was $2,584,000 and cash provided by financing activities was $6,652,000. We also experienced a decrease in cash of $1,609,000 from the effect of foreign currency exchange rate fluctuations.Operating ActivitiesOur operations used cash of $5,329,000 for the nine months ended September 30, 2016. This compares toMarch 31, 2020, cash used in operating activities of $3,592,000 for the nine months ended September 30, 2015. We had a consolidated net loss in the nine months ended September 30, 2016 amounting to $3,824,000 compared to consolidated net earnings of $8,720,000 in the nine months ended September 30, 2015. Depreciation and amortization was $7,705,000 in the nine months ended September 30, 2016 compared to $8,286,000 in the nine months ended September 30, 2015; the decrease in this category is primarily due to increases in accounts receivable related to normal first quarter lower collections as many of our public sector clients await new funding to become available in the full amortizationnew year, as well as, slowing of collections as discussed above under Impact of COVID-19 on our business. For the three months ended March 31, 2019, cash provided by operating activities was primarily the result of the shorter-lived intangible assetstiming of companies which we acquired over the last several yearspayments to vendors and subcontractors, partially offset by amortization of intangibles arising from the acquisitions of Cadogans and IMS and the increase in property and equipment primarily related to the relocation of our corporate headquarters to Philadelphia.and letters of credit and escrow. Restricted cash decreased from $9,067 at September 30, 2016 and December 31, 2015 were $4,886,000 and $4,694,000, respectively.Average days sales outstanding (“DSO”)2019 to $7,410 at September 30, 2016 was 118 days compared to 98 days at September 30, 2015 and 111 days at June 30, 2016. DSO is a measure of our ability to collect our accounts receivable and is calculated by dividing the total of the period-end billed accounts receivable balance by average daily revenue (i.e., revenue for the quarter divided by 90 days). Generally, the age of our receivables is adversely affected by the timing of payments from our clients in Europe and Africa, which have historically been slower than payments from clients in other geographic regions of the Company’s operations. The increase in DSO in 2016 from 2015 wasMarch 31, 2020, primarily due to a slowingthe return of collections from our clients in the Middle East, particularly Oman.Although we continually monitor our accounts receivable, wecollateral on matured bonds.thekey working capital accounts in total, rather than by individual elements.total. The primary elements of our working capital are accounts receivable, prepaid and other current assets, and accounts payable and deferred revenue. Accounts receivable consist of billingto our clients for our consulting fees and other job-related costs. Prepaid expenses and other current assets consist of prepayments for various selling, general and administrative costs, such as insurance, rent, maintenance, etc. Accounts payable consist of obligations to third parties relating primarily to costs incurred for specific engagements, including pass-through costs such as subcontractor costs. Deferred revenue consists of payments received from clients in advance of work performed.business, as well as our acquisition activity.ActivitiesWeactivities$2,584,000in investing activities for the purchase of leasehold improvements, computers, office equipment, furniturefixed assets.fixtures. Of this amount, $1,500,000 was used to implement a database system for our Human Resource department.Financing ActivitiesNet2019, cash provided by financing activities was $6,652,000. We repaid $900,000used to fund the ongoing operating activities.2014 Term Loan Facility and $41,000U.S. Dollar.Philadelphia Industrial Development Corporation loan. We paid $1,531,000 for deferred consideration related to the IMS acquisition. We had net borrowings of $8,950,000 under our credit facility. We received $285,000 from purchases under our Employee Stock Purchase Plan and the exercise of stock options. We paid $111,000 as dividends to noncontrolling interests.Recent Accounting PronouncementsOn May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP, including industry specific guidance. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU allows for either retrospective or prospective adoption. The ASU was to be effective for interim and annual periods commencing after December 15, 2016, however, in August 2015, the FASB issued ASU 2015-14 which defers the effective date for one year. Early adoption is permitted as of January 1, 2017. We are in the process of determining the method of adoption and assessing the impact of the ASU on our consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Topic 825-10), which requires all equity investments to be measured a fair value with changes in fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this ASU also require an entity to (1) present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (2) provide separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. In addition, the amendments in this ASU eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. This ASU will be effective for us commencing January 1, 2018. We are in the process of assessing the impact of this ASU on our consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require us to recognize lease assets and lease liabilities (related to leases previously classified as operating under previous GAAP) on our consolidated balance sheet. The ASU will be effective for us commencing January 1, 2019. We are in the process of assessing the impact of this ASU on our consolidated financial statements.In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) — Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for us commencing January 1, 2020 with early adoption permitted commencing January 1, 2019. We are in the process of assessing the impact of this ASU on our consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. This ASU’s amendments add or clarify guidance on eight cash flow issues: debt prepayment, settlement of zero-coupon debt instruments, contingent consideration payments, insurance claim proceeds, life insurance proceeds, distributions from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. The ASU is effective commencing January 1, 2018 with earlier adoption permitted. We adopted this ASU which only affected our presentation of payments for deferred consideration related to the IMS acquisition by reclassifying the payments from operating cash flows to financing cash flows.In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Under the new standard, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset (with the exception of inventory) when the transfer occurs. Under current GAAP, entities are prohibited from recognizing current and deferred income taxes for an intra-entity transfer until the asset is sold to a third party. Examples of assets that would be affected by the new guidance are intellectual property and property, plant, and equipment. The ASU will be effective for us commencing January 1, 2018 with early adoption permitted as of January 1, 2017. We expect that adoption of this ASU will not have a material effect on our consolidated financial statements.Quarterly FluctuationsOur operating results vary from period to period as a result of the timing of projects and assignments. We do not believe that our business is seasonal.We believe a strong indicator of our future performance is our backlog of uncompleted projects under contract or awarded. in handin-hand that we expect to resultrecognize as CFR in future consulting feeperiods as a component of total revenue. Project ManagementBeginning with the year ended December 31, 2019, we excluded backlog from indefinite delivery/indefinite quantity ("ID/IQ") contracts in circumstances where the work has not yet been approved by the client. ID/IQ contracts require us to deliver an indefinite amount of service over a pre-determined period of time. Estimated future CFR from ID/IQ contracts is only included in our total backlog if the work has been approved starting in 2019, whereas prior year backlog included estimated CFR from all ID/IQ contracts. Our backlog is evaluated by management, on a project-by-project basis, and is reported for each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or cancelled. Construction Claims backlog is based largely on management’s estimates of future revenue based on known construction claims assignments and historical results for new work. Because a significant number of construction claims may be awarded and completed within the same period, our actual construction claims revenue has historically exceeded backlog by a significant amount.Our backlog is important to us in anticipating and planning for our operational needs. canceled.GAAP,generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.At September 30, 2016, our backlog was $944,000,000 compared to $949,000,000 at June 30, 2016. Our net bookings during the third quarter of 2016 were $143,000,000, which equates to a book-to-bill ratio of approximately 97%. While this is short of our expectations, it is consistent with the stoppage or scaling back of projects in the Middle East due to the economic impact caused by the recent drop in oil prices and the political upheaval and civil unrest in the region. This will continue to be a major area of focus for the balance of 2016 and in 2017. We estimate that approximately $413,000,000,or 43.8%, of the backlog at September 30, 2016 will be recognized during the twelve months subsequent to September 30, 2016. Historically, the impact of terminations and modifications on our realization of revenue from our backlog has not been significant; however, there can be no assurance that such changes will not be significant in the future. Furthermore, reductions of our backlog as a result of contract terminations and modifications may be offset by additions to the backlog.revenue. Total Backlog 12-Month Backlog March 31, 2020 United States $ 362,315 48.1 % $ 100,741 44.5 % Latin America 10,370 1.4 % 4,395 1.9 % Europe 83,850 11.1 % 33,405 14.7 % Middle East 195,675 26.0 % 58,425 25.7 % Africa 82,928 11.0 % 24,143 10.6 % Asia/Pacific 17,943 2.4 % 5,937 2.6 % Total $ 753,081 100.0 % $ 227,046 100.0 % December 31, 2019 United States $ 371,205 45.8 % $ 103,503 42.0 % Latin America 16,351 2.0 % 5,068 2.1 % Europe 90,134 11.1 % 35,000 14.2 % Middle East 229,373 28.3 % 74,846 30.2 % Africa 86,203 10.6 % 22,574 9.2 % Asia/Pacific 17,995 2.2 % 5,563 2.3 % Total $ 811,261 100.0 % $ 246,554 100.0 % RiskRefer to the Company’s 2015 Annual Report on Form 10-K forRisk.complete discussionsmaller reporting company as defined by Rule 12b-2 of the Company’s market risk. There have been no material changesSecurities Exchange Act of 1934 and are not required tomarket risk information included in the Company’s 2015 Annual Report.under this item.(asas such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2016.March 31, 2020. Management concluded that, due to the on-going remediation associated with the material weakness identified in our 20152019 Annual Report on Form 10-K (“20152019 Form 10-K)10-K"), our disclosure controls and procedures were ineffective as of September 30, 2016March 31, 2020 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.companyCompany have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.overOver Financial ReportingSeptember 30, 2016,March 31, 2020, and, other than those remediation efforts described in “Management’s Remediation Initiatives” in Item 9A of our 20152019 Annual Report on Form 10-K, there10-K. There were no other material changes in our internal control over financial reporting that occurred during the three months ended September 30, 2016March 31, 2020 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.However, as explained in greater detail under Item 9A of our 2015 Form 10-K for the year ended December 31, 2015, we have, or are in the process of, implementing a broad range of remedial procedures to address the material weaknesses in our internal control over financial reporting identified in our 2015 Form 10-K. Our efforts to improve our internal controls are ongoing and focused on:· Enhancing existing procedures and controls to more thoroughly assess unusual significant items. While we have completed our testing of these new controls and have concluded they are in place and operating as designed, weare monitoring their ongoing effectiveness, and will consider the material weakness remediated after the applicable remedial controls operate effectively for an additional period of time.· Enhancing our close the books processes at the corporate and local levels to ensure effective management reviews and communication with accounting personnel over the accounting for estimates and non-routine transactions.Therefore, while there were no changes, other than the matter discussed above, in our internal control over financial reporting in the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, we continued monitoring the operation of these remedial measures through the date of this Form 10-Q.For a more comprehensive discussion of the material weaknesses in internal control over financial reporting identified by management as of December 31, 2015, and the remedial measures undertaken to address these material weaknesses, investors are encouraged to review Item 9A, Controls and Procedures, in our 2015 Form 10-K.Other InformationOTHER INFORMATIONFactorsFactors.There have been no material changes pertaining to risk factors discussed in the Company’s 2015 Annual Report.FundsProceeds.SecuritiesSecurities.InformationInformation.10.1Employment Agreement between the Company and Raouf S. Ghali, dated August 18, 2016 (Included as Exhibit 10.1 to the Registrant’s Current Report on Form 89-K filed on August 19, 2016 and incorporated herein by reference).10.2Settlement Agreement among the Company, Bulldog Investors LLC, and certain directors of the Company, dated September 16, 2016.31.1 31.131.2 31.232.1 32.132.2 32.2101.INS 101.INS101.SCH 101.SCH101.PRE 101.PRE101.CAL 101.CAL101.LAB 101.LABLinkbase Document.101.DEF 101.DEF104 The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.Hill International, Inc. By: /s/ Raouf S. Ghali Dated: November 14, 2016By:/s/ David L. RichterDavid L. RichterDated: May 7, 2020 Dated: November 14, 2016John Fanelli IIIJohn Fanelli IIIExecutive Vice President andChief Financial Officer(Principal Financial Officer)Dated: November 14, 2016By:/s/Ronald F. EmmaRonald F. EmmaChief Accounting(Principal Financial Officer( and Principal Accounting Officer)Dated: May 7, 2020